India-UK FTA: Key highlights

The following are the highlights of the India-UK free trade agreement signed on Thursday.

It is officially called CETA (Comprehensive Economic and Trade Agreement).

Agri:

* India to get duty-free access in several agri goods in the UK, such as fruits, vegetables, cereals, turmeric, pepper, cardamom, and processed goods like ready-to-eat food, mango pulp, pickles, and pulses.

* Over 95 per cent of agricultural and processed food tariff lines will attract zero duty.

* Duty-free access is expected to increase agri exports by over 20 per cent in the next three years, contributing to India's goal of USD 100 billion agri-exports by 2030.

* Provisions related to Technical Barriers to Trade (TBT) will streamline certification, cutting down time and cost for exporters.

* The FTA creates new market access for emerging products, such as jackfruit, millets, and organic herbs, helping farmers diversify against domestic price volatility.

* India's fisheries sector, especially in Andhra Pradesh, Odisha, Kerala, and Tamil Nadu, will see expansion through access to the UK's USD 5.4 billion marine import market.

* India is not giving any tariff concessions on sensitive sectors - dairy products, apples and oats, and edible oils.

* India exports worth USD 36.63 billion globally, while the UK imports USD 37.52 billion, but imports just USD 811 million from India, indicating a room for growth in high-value agri products.

* States like Maharashtra (grapes, onions), Gujarat (groundnut, cotton), Punjab and Haryana (basmati rice), Kerala (spices), and NE states (horticulture) stand to benefit from the pact.

Marine:

* The CETA eliminates UK tariffs on India's marine products.

* It will help improve the price realisation for Indian exporters, benefits that flow down to coastal fisherfolk through higher procurement rates.

* Despite the UK's USD 5.4 billion marine import market, India's share remains at just 2.25 per cent, underscoring a significant untapped export opportunity.

* With existing UK tariffs on Indian shrimp ranging between 4.2 per cent and 8.5 per cent, the FTA's tariff elimination is expected to unlock rapid growth, particularly in shrimp, tuna, fishmeal, and feeds.

* Shrimp, tuna, fishmeal, and feeds, currently taxed between 4.2 per cent and 8.5 per cent, will become completely duty-free.

* The FTA's Sanitary and Phytosanitary (SPS) measures help Indian exporters meet UK standards with ease, reducing rejections and strengthening trust.

* Despite strong demand, India's current share in UK marine imports is only 2.25 per cent, leaving massive room for expansion.

Plantation Sector:

* The UK already represents a significant market for India, absorbing 1.7 per cent of coffee, 5.6 per cent of tea, and 2.9 per cent of spice exports, now primed for exponential growth with duty-free access on these products.

* Duty-free access to instant coffee will help Indian businesses compete with other European suppliers of instant/value-added coffee, such as Germany, Spain, and the Netherlands.

* FTA will create a powerful springboard for boosting exports of value-added coffee products, particularly Indian instant coffee, to the UK.

Oilseeds:

* With reduced tariffs and streamlined procedures, Indian Oilseed exporters can become more competitive in the UK market, potentially leading to higher exports.

Textiles:

* Zero-duty market access for the textiles and clothing sector accounts for 1,143 tariff lines (or product categories), contributing 11.7 per cent.

* India is facing a duty disadvantage vis-a-vis Bangladesh, Pakistan and Combodia, which had duty free access to the UK market. The FTA eliminates the tariff on textile imports from India, thereby enhancing its competitiveness.

* In textiles and clothing, while the UK's total imports (USD 26.95 billion) are lower than India's global exports (USD 36.71 billion), India still supplies worth only USD 1.79 billion to the UK.

*Sectors poised for exponential growth include RMG (ready-made garments), Home Textiles, Carpets, and Handicrafts, where the removal of duties creates immediate and substantial competitive advantages.

* India is expected to gain at least 5 per cent additional market share in the UK within 1 to 2 years.

Engineering:

* Number of goods to get zero-duty market access.

* The UK is India's 6th largest engineering export market; it records strong trade momentum with growth of 11.7 per cent in 2024-25 over the previous year.

* India's global exports are USD 77.79 billion, while the UK imports USD 193.52 billion worth of such products, yet only USD 4.28 billion comes from India, signalling strong potential for expansion.

* With tariff elimination (as high as 18 per cent) under the FTA, engineering exports to the UK could nearly double in the next five years, reaching over USD 7.5 billion by 2029-30.

* Healthy Growth Projections: Export of key engineering products like electric machinery, auto parts, industrial equipment, and construction machinery projected to grow at 12.20 per cent CAGR.

Electronics and Software (ESC):

* Zero-duty access is expected to accelerate exports of electronic products, with smartphones, optical fibre cables, and inverters set to strengthen India's foothold in the UK market.

* Ambitious UK commitments for Software and IT-enabled Services to unlock new markets, drive job creation, and enhance export potential for Indian software firms; 15-20 per cent annual growth projected from current USD 32 billion in 2024-25.

Pharma:

* India exports USD 23.31 billion globally and the UK imports nearly USD 30 billion, but Indian pharma accounts for under USD 1 billion, indicating significant headroom for growth.

* Generics get the sweet medicine - The zero tariff provisions under the FTA are expected to significantly enhance the competitiveness of Indian generics in the UK market, which remains India's largest pharmaceutical export destination in Europe.

* Number of medical devices like surgical instruments, diagnostic equipment, ECG machines, X-Ray systems will not attract any duty.

* This will reduce costs for Indian med-tech companies and make their products more competitive in the UK market.

Chemicals:

* The FTA is anticipated to trigger a dramatic 30-40 per cent increase in India's chemical exports to the UK, propelling figures to an estimated USD 650-750 million in 2025-26.

* In chemicals and allied products, India exports over USD 40.52 bn globally, against the UK's imports of USD 35.11 billion, but captures only USD 843 million of that market, highlighting a potential to scale up, especially with improved market access under the FTA.

Plastics:

* Duty-free access presents opportunity to tap into the UK's robust demand for plastics, films, sheets, pipes, packaging, tableware, and kitchenware, segments where India has proven manufacturing strength.

* Duty-free access allows India to better compete with the UK's major import sources, such as Germany, China, the United States, the Netherlands, Belgium, and France.

* Projected growth is 15 per cent, and the target for the next 5 years for the calendar year 2030 is USD 186.97 million.

Sports goods/toys:

* Exports of soccer balls, cricket gear, rugby balls, and non-electronic toys are set to increase.

*Indian sports goods and toys will benefit from eliminating UK import duties, making them more price-competitive compared to countries like China or Vietnam, which do not have similar FTAs with the UK.

Gems and Jewellery:

* India's total G&J exports to the UK are valued at USD 941 million, with USD 400 million coming from jewellery. The FTA opens up a huge market as the UK imports approximately USD 3 billion worth of jewellery annually.

Tariff relaxations under the FTA are projected to double India's gems and Jewellery exports to the UK within the next 2-3 years.

Leather:

* From 16 per cent to zero, tariffs eliminated on India's leather and footwear, empowering India's craftsmanship to walk tall worldwide.

* The FTA is projected to add 5 per cent UK market share within 1-2 years. Exports are expected to exceed USD 900 million.

* MSMEs in hubs like Agra, Kanpur, Kolhapur, Chennai to benefit from tariff-free exports; GI protection; simplified standards.

Others:

* India stands to benefit from the duty elimination of tariffs on approximately 99 per cent of tariff lines, covering nearly 100 per cent of the trade value.

* In key labour-intensive sectors, duties have been reduced to zero from previously up to 20 per cent on marine products, 12 per cent on textiles and clothing, 8 per cent on chemicals, and 10 per cent on base metals.

* In the processed food sector, tariffs on 99.7 per cent of lines have been slashed from as high as 70 per cent to zero, offering a major boost for Indian exporters.

Indian services sectors:

* The FTA eases mobility for Indian professionals, including Contractual Service Suppliers: Those working on specific projects for a UK client.

* Independent Professionals: Skilled individuals like yoga instructors, classical musicians, and Chef de Cuisine will find it easier to offer their services in the UK.

Innovation chapter (First of its kind):

* Aims to support innovative processes and trade in innovative products.

* Provisions for joint activities on emerging and transformative technologies, fostering a dynamic environment for learning and development.