International RelationsImportant2025-05-06

Conclusion of India-UK Comprehensive Economic and Trade Agreement

In News

What Happened

On May 6, 2025, Prime Minister Narendra Modi and UK Prime Minister Keir Starmer successfully concluded negotiations for the India-UK Comprehensive Economic and Trade Agreement (CETA). The landmark treaty eliminates tariffs on 99% of Indian exports to the UK. It also features a Double Contribution Convention to aid professionals working overseas.

Why It Matters

This agreement is highly significant for India as it secures unprecedented market access for its labour-intensive sectors like textiles, gems, and leather. Additionally, the social security pact directly benefits the Indian IT sector by exempting professionals from double social security contributions for up to three years.

Background

History & Context

India and the UK launched formal Free Trade Agreement (FTA) negotiations in January 2022. The talks spanned multiple rounds over three years, overcoming hurdles related to intellectual property rights, rules of origin, and the mobility of professionals. The change in UK leadership with Keir Starmer taking office brought renewed momentum to finalise the Comprehensive Economic and Trade Agreement (CETA).

What Changed

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BEFORE: Indian exports faced various tariffs and duties entering the UK market. NOW: The agreement eliminates tariffs on 99% of Indian exports, significantly boosting the competitiveness of Indian goods.
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BEFORE: Indian professionals temporarily working in the UK had to pay social security contributions in both countries without getting corresponding benefits. NOW: A Double Contribution Convention exempts Indian professionals in the UK from these social security contributions for three years.
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BEFORE: Stringent 'Rules of Origin' and non-tariff barriers complicated full market access for certain Indian manufactured goods. NOW: Streamlined customs procedures and mutually agreed rules of origin facilitate an easier and more predictable trade flow.

Prelims Angle

NCERT Connection

This links to Class 12 Contemporary World Politics Chapter 4 - Alternative Centres of Power. It illustrates how rising economic powers like India leverage bilateral trade agreements to strengthen their global economic integration and influence outside of traditional multilateral forums.

Practice Questions

Q1

Correct Statement(s)

Consider the following statements regarding the India-UK Comprehensive Economic and Trade Agreement (CETA): 1. It eliminates tariffs on 99% of Indian exports to the UK. 2. It includes a Double Contribution Convention that permanently exempts Indian professionals from paying income tax in the UK. Which of the statements given above is/are correct?

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