Chetan Aggarwal
The India-UK Comprehensive Economic and Trade Agreement (CETA), concluded in July, marks one of the most ambitious bilateral trade pacts India has signed in recent years.
An agreement between the world’s fourth and sixth-largest economies, with bilateral trade already touching $56 billion and a target to double by 2030, carries economic weight especially at a time when international trade and monetary cooperation face headwinds.
But CETA also carries a deeper meaning: it holds an intrinsically symbolic status, both as a corrective to the inequities of colonial trade and a statement of where India stands in the global order under Prime Minister Narendra Modi.
India’s first experience with a “free trade” arrangement with Britain came under colonial rule, when tariff protections for Indian industries were dismantled to integrate the country into the imperial economy. As Shashi Tharoor notes in his book Inglorious Empire, “By the end of the nineteenth century, India was Britain’s biggest source of revenue, the world’s biggest purchaser of British exports… Indians literally paid for their own oppression.” Lizzie Collingham’s The Hungry Empire captures the dynamic – colonies supplied raw materials while British industry reaped the profits, and the British consumer enjoyed a higher standard of living. The result was de-industrialisation: artisanal sectors, particularly textiles, collapsed as markets were flooded with British goods.
It is against this backdrop that the CETA is so striking. For the first time in over two centuries, India’s textile sector and other similar industries receive a fighting chance to compete fairly on the global stage. This time, India under Modi is a co-architect, negotiating as a sovereign state with the ability to set terms as per Indian priorities.
Lessons from the past have been learnt. Earlier free trade agreements (FTAs) were skewed against India as they were signed with countries competing in manufacturing, or developing countries. They did not provide expected benefits in either technology transfer or substantial market access. In AIFTA (the FTA with ASEAN), between FY 2009 and FY 2023, imports from ASEAN rose 234% compared to a 130% rise in exports, widening India’s trade deficit from $7.5 billion to $44 billion. The decision to walk away from the Regional Comprehensive Economic Partnership (RCEP) despite huge pressure has also proven prescient, with reports of economic dumping hurting different members, hitting their domestic industries.
India has also emerged as an attractive investment and trade destination due to significant economic reforms, including tax, FDI norms, digital governance, etc., and macroeconomic stability under the Modi government. This has provided a negotiating space for India not just to ask for market access but as a high-growth partner courted by large economies. In fact, arguably, India is the largest untapped open market left of the developed economies – something that negotiators on both sides are beginning to realise and leverage.
The contents of CETA reflect this new reality. Nearly 99% of Indian export lines to the UK will face reduced or zero duties, benefiting sectors such as textiles, pharmaceuticals, engineering goods, electronics, and agricultural products. Indian suppliers have been guaranteed access to UK central-level procurement and selected utilities. Additionally, the Intellectual Property Rights (IPR) chapter is India’s most comprehensive IPR chapter of any trade agreement to date.
Two major gains stand out. First, strict Rules of Origin guard against third-party circumvention. This includes specific provisions for certain sectors (such as the ‘Wholly Obtained’ criteria applied to many raw and semi-processed agricultural products) as well as broader systemic changes, and strong verification mechanisms (including the ability to suspend preferences).
Second, the agreement addresses services, a core strength of India’s economy. India exported over $19.8 billion in services to the UK in 2023, and CETA promises to expand this further through multiple provisions. The Double Contribution Convention (DCC) addresses a long-standing grievance of Indian workers forced to pay social security benefits without receiving any. Indians working in the UK will now save about Rs 4,000 crore annually. This is the first time that the UK has granted this concession to any country.
CETA thus sends multiple messages. To the EU, US, and other partners, it shows India is willing to open its markets, provided negotiations are balanced, reciprocal, and respectful of domestic needs. It also provides a rules-based framework on how global trade can be developed in a volatile era marked by arbitrary executive fiat.
CETA is more than a trade deal. It is a statement that India has moved from being a passive subject in a colonised world to an equal partner in shaping global commerce.
