What India Gained—and Gave Up—in the UK Free Trade Deal
insights and analysis of what this FTA really means for India’s exporters, its negotiating strategy, and its ability to shape trade policy in the years ahead
In this episode, author and journalist Puja Mehra speaks to trade policy expert Prof. Abhijit Das about the India-UK Free Trade Agreement (FTA) that was signed on 24th July 2025 after years of negotiation. Hailed as a major breakthrough, the agreement promises tariff-free access for Indian exports like textiles, leather, and marine products, along with visa commitments for service professionals. But what lies beneath the surface?
Prof. Das explains why, despite the initial excitement, the fine print raises concerns—ranging from stringent UK standards in agriculture and environment to new subsidy notification obligations and a surprising shift in India’s position on compulsory licensing for medicines. He unpacks what India has agreed to in areas like Intellectual Property Rights, labour, and gender, and whether these concessions could come at the cost of future policy flexibility.
Tune in for insights and analysis of what this FTA really means for India’s exporters, its negotiating strategy, and its ability to shape trade policy in the years ahead.
NOTE: This transcript is done by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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TRANSCRIPT
Puja Mehra: Professor Abhijit Das, thank you so much for coming to the show to discuss the India-UK FTA and Comprehensive Economic and Trade Agreement that has just been signed yesterday. I can't wait to hear from you what you think of it. I have seen a lot of very positive commentary and first remarks, responses from a host of people.
There seems to be a lot of excitement about it. So please tell us what you think.
Abhijit Das: First and foremost, Puja, thank you for having me on your podcast. Now, rightly so, there has been a lot of excitement about the India-UK Free Trade Agreement, or CETA as it is called. This has been long awaited if we take our minds back to 2022.
There was some sentiment that we would have a deal by Diwali and the two sides appeared to be literally hurtling towards a deal. And I would say that luckily that didn't happen. And that enabled both sides to reassess their positions and come up with an agreement that would be on firmer footing after a lot of reflection.
So that's one important point which we should bear in mind. The positives, what we've heard and what little I have managed to reap in the text, positives are quite a few. First and foremost, with tariffs coming down on some of the products of our export interests in the UK market, such as textiles, apparel, leather products, footwear, gems and jewellery, some agriculture products as well.
These are set to see good export prospects. Whether our industry is able to take advantage of these export prospects is a second matter. But the government has provided the industry, the business, with the export opportunities.
Same goes for services. There are multiple channels through which the UK will facilitate India's exports of services, in particular of service professionals. Then we also have something on geographical indications, products whose quality, characteristics and reputation are closely linked with the place of production.
Darjeeling tea is a good example. Ulhapuri chappals, much in the news these days, is another good illustration of a geographical indication. So what the FTA promises is some sort of a speedy mechanism for mutual recognition of GIs of the two sides.
So these are issues which would certainly be exciting for industry and businesses on both sides.
Puja Mehra: Professor Das, just to take up the tariff reduction, I believe to zero for labour-intensive Indian exports such as in textiles, apparel, footwear, etc., which is the main source of excitement, I feel, because it feeds into India's ability to resolve the jobs problem, the need to create jobs that we've been trying to for some time now. Is the UK market large enough and does this reduction of tariffs make Indian exports competitive vis-a-vis other countries, other exporters to the UK?
Abhijit Das: Puja, UK market is certainly large, but it is not growing at a fast pace. So yes, the opportunities, the potential which might exist, there may be restrictions. But having said that, what is important to bear in mind is that our exporters were competing with some of the other countries who were getting access into the UK market at very low tariffs.
So there is likely to be a diversion of trade from these competitors in favour of Indian exporters. That is where, even if the UK market is not expanding at a fast pace, because of this diversion of trade in favour of Indian exporters, that is where the opportunities will really arise.
Puja Mehra: That sounds exciting. Are there any issues that are also of concern or largely everything is positive?
Abhijit Das: On manufacturing exports, I did not see anything in the agreement which makes mention of the UK's carbon border adjustment measure. The implication is that once the UK starts applying, imposing the CBAM, this has the potential to erode the price competitiveness of Indian exports, particularly in sectors which are energy intensive, and that will diminish some of the export prospects. Turning to the agriculture sector, the problem really will arise from the stringent sanitary and phytosanitary standards which are applied by the UK.
If our exporters are not able to comply with these standards, then the opportunity will remain just a potential. It will not get realised to a large extent. So that is an area where the government might play a facilitative role or trying to strengthen the ability of our agriculture exporters to comply with the SPS requirements in the UK market.
So that would be an area of concern and also how it could be addressed. Then there are areas of concern in, let us say, government procurement or intellectual property rights, as well as some of the hardcore non-trade areas such as labour, environment, gender, etc. We could discuss those subsequently.
Puja Mehra: Before we get to them, should we talk a little about trade and services?
Abhijit Das: Yes, certainly. In trade and services, the UK has committed to ease the mobility for professionals. And when I say professionals, this includes different categories such as contractual service suppliers, business visitors, intra-corporate transferees.
This is definitely an important commitment on part of the UK. Then we have a provision of 1800 additional visas for select service providers. Of course, the number is not very big, but it will be for service providers, yoga instructors, chefs, etc.
Then there is a commitment to conclude an agreement around the social security contribution, what is technically called the Double Contribution Convention, whereby if an Indian service provider pays social security in India and he delivers works in the UK for up to three years, then he will not be required to make the social service contribution in the UK as well. At this juncture, there is a commitment to conclude an agreement on this issue, but hopefully the agreement will be concluded in tandem with the implementation of the free trade agreement. Then there is also a promise to initiate negotiations for mutual recognition of professional qualifications in the two countries.
Here, the lead will have to be taken by the recognised professional bodies in the two sides. Governments may not have that bigger role to play, but yes, that still will be a facilitative process and the governments on the two sides could endeavour to hasten the possibility of the professional bodies in different sectors such as accountancy, nursing, dental, medical to come to mutual recognition of each other's qualifications. These are some of the areas where we could see substantial gains in services in the UK market.
Let's also remind ourselves that at this juncture, services exports from India to the UK outstrip our goods exports. These commitments on the UK side should be lauded.
Puja Mehra: I think the agreement says that there's going to be a substantial increase in annual trade by the year 2040. Does that figure seem plausible and does that figure besides seeming plausible seem something to be celebrated? Is it ambitious?
Abhijit Das: Let me put it this way, Puja. There is a study which came out on the website of the UK government sometime around 6th or 7th of May. That study sought to quantify the likely increase in bilateral trade on account of the FTA.
The study is very carefully worded. What the study says is that because of the FTA by 2040, the bilateral trade will increase by 25 billion pounds per year. Now, that doesn't mean the increase in bilateral trade will be 25 billion pounds in 2026, another 25 billion pounds in 2027.
No. What that means is bilateral trade will increase each year, no doubt. And the cumulative increase will amount to 25 billion pounds by 2040.
Now, if we convert those numbers into annual increases, for India, it translates into an increase in exports of about $1 billion each year, which may not be a very significant amount. So, while we should be celebrating some of the provisions of the FTA, we have to bear in mind that the actual increase in our exports of goods and services taken together may not be a very astounding figure. If we go by the UK government study, it may be a modest increase of about 10 billion pounds overall by 2040.
Puja Mehra: And we don't have an Indian estimate for this?
Abhijit Das: I haven't come across an Indian estimate and nor has the government put out an Indian estimate.
Puja Mehra: Your own view is that we'll do more than this, the increase would be more than this, given it is such a huge tariff reduction which allows Indian exporters a certain competitive advantage over other economies?
Abhijit Das: Puja, from the UK perspective, rather from the perspective of our exporters in the UK market, the UK was already imposing fairly low tariffs. So, to that extent, tariffs will certainly come down to zero on a large number of products, but it'll come down to zero from a very low level. So, that will not result in huge export increases.
And that gets reflected in the study by the UK government. 10 billion pounds increase for India, 15 billion pounds increase for UK. And coming back to your question whether the actual performance may be more, that will depend on many dynamics.
Actual performance could be less as well if the UK decides to start imposing the carbon border tax. If our agri exporters are not in a position to comply with stringent sanitary, phytosanitary requirements, the actual exports might be more than what is projected if we are able to attract investment in some of the key sectors, if our exporters in textile and clothing sector are able to scale up and take advantage of the export opportunities. So, I would be hesitant to commit either way.
I've given you the two possibilities. If ABC happens, then the export potential may not be realised. But if DES happens, then maybe we might be able to do much better than these projections.
So, sorry, I'm not able to give you a pinpointed black and white answer to your very important question, Puja.
Puja Mehra: No, I understand because so much depends on how exporters respond to these conditions that they will be subject to being able to access the UK market. But was it at all possible for India to make sure that these conditions would not apply? Or India would also eventually like Indian exporters and Indian business to comply with some of these conditions such as on environment etc.?
Abhijit Das: Let's look at the carbon border tax. It is supposed to be in favour of protecting the environment. And if we go by a study undertaken by UNCTAD, then the European Union's CBAM will have a glorious impact of reducing global carbon emissions by a figure of 0.1%. So, clearly, these measures are not aimed at having very strong environmental results. These measures are more or less a disguised restriction on trade. These are green protectionist measures. And I'm sure Indian negotiators would have taken up this issue with their UK counterparts.
The fact that there is nothing in the agreement on this suggests that there was no meeting of minds, there was no convergence on this very, very important issue, which can threaten to undermine the export opportunities from our side.
Puja Mehra: Right, right, right. And could there have been a possibility for transfer of technology, you know, for green products, etc.? Is that something we could have tried for?
Abhijit Das: Puja, in some of these sectors, rather in one of the chapters which is related to environment, there was a possibility of at least injecting the idea of technology transfer for green products. Unfortunately, it does not figure in the final agreement. So, we have missed an opportunity.
We should have attempted to have some language, some text, even if it were not to be legally binding, not legally enforceable. But at least a beginning could have been made, whereby there could have been some soft commitment from the UK side on facilitating transfer of technology for environmental products. That would have given a signal that the UK is really serious when it comes to addressing environmental challenges.
But there we seem to have missed this opportunity.
Puja Mehra: In fact, I tried reading the agreement in the 30 chapters and some of the chapters I didn't read, but the titles relate to corruption, IPR, competition, subsidies, and state-owned enterprises. I know it's called a comprehensive agreement, but what is the link with the opening up of, we are being told that nearly 100% of trade has been freed up. So, is there a link?
Why do we need to have these chapters? I couldn't understand.
Abhijit Das: Puja, nor could I, and that is why I call these modern generation FTAs as far from trade agreements because they have issues which have nothing or almost nothing to do with trade. What is happening is that the developed countries are using trade negotiations and trade platforms for rulemaking or for enforcing obligations in many different areas. Obligations taken, for example, at ILO on labour standards or obligations taken in multilateral environment agreements on environmental issues.
Their implementation is sought to be monitored through trade agreements, which I don't think is a good trend from the perspective of developing countries.
Puja Mehra: And when you say that these will be monitored, like for instance, the chapter on subsidies, will they monitor subsidies India has in place for our exporters or, for instance, the production link incentives, etc.? Does this agreement have any impact on any of these subsidies?
Abhijit Das: The provision on subsidy will really require India to make periodic notifications in respect of what are called specific subsidies. And India would be required to, in a way, demonstrate how these specific subsidies do not have an adverse impact on trade with the UK. We will also have to ensure that these subsidies are used for the specific purpose for which they were granted.
So these are some new obligations which go beyond the corresponding obligations at the WTO on the subsidies agreement. And that really raises a very important question in my mind. Agreement has to be mutually beneficial, right?
I was not able to identify in chapters such as those on subsidies, or labour, or environment, where I could have said, well, this particular provision is in favour of India. I couldn't identify those. So, I presume that these are based more on the template of the developed country FTAs.
And we may not have succeeded in pushing issues of our interest in these chapters. That is my apprehension.
Puja Mehra: I'd like you to explain this a bit more. Just taking the example of subsidies, for instance, if the UK has concerns about some subsidy, say production link subsidy to a sector that they also have an export interest in, will they be able to penalise India in some way? Or Indian exporters in some way?
Abhijit Das: No, they will not be able to penalise us. There will be a need to notify the subsidies. There will be consultations where presumably India will have to hear out the UK side and see how best it can address the concerns of the UK.
Now, the UK could have done the same thing at the WTO, but the WTO processes are more time consuming. And in the FTA, these processes are likely to be expedited and there'll be additional obligations on India. For example, what I said is that we will have to ensure that the subsidies are used only for the specific purpose for which they are granted.
And then the burden of proof will be on us to show that these were granted and do not have an adverse effect on trade. I do see some difficulties in implementation of these chapters. Although, let me hasten to add that these chapters, including the chapter on subsidies, will not be subject to dispute settlement.
But having said that, their implementation will be monitored through committees. And if we are found to be repeatedly flouting the rules contained in these chapters, then the UK will be well within its rights to say that India did not negotiate in good faith or India is not implementing the agreement in good faith.
Puja Mehra: And what does that result lead to?
Abhijit Das: Reputational damage.
Puja Mehra: Right, right, right. And Professor Das, now that we have this agreement with the UK, how does this affect our other ongoing trade negotiations? Will other countries also demand similar provisions?
Abhijit Das: Bang on, not Puja. The concessions that we have given to the UK, be it in terms of the sectors where we've chosen to eliminate tariffs or provisions on government procurement, European Union, US, they will definitely pitch their demands using what we have given to the UK as the baseline. And as we have seen in the case of government procurement, each subsequent FTA builds on and creates new obligations, expands the liberalisation, makes the demands, makes India's commitments more expansive, more onerous.
So, what you have said is a very, very likely scenario to unfold in the coming few months. Right.
Puja Mehra: And what about the chapter on IPR? What does that seek to do?
Abhijit Das: Puja, the IPR chapter is quite extensive, covering a large number of intellectual property rights as well as enforcement. I have not yet had the opportunity of going through the IPR chapter tooth comb. But what I found a bit worrisome is in the context of patents and access to medicine.
Let me step back a minute and mention that under WTO's TRIPS agreement, there is an exception whereby governments can grant a compulsory licence in case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. Now, this is commonly called the compulsory licence provision. This is an effective tool to make sure, let us say, in the pharmaceutical sector that the patent holders do not charge very high, exorbitantly high prices.
Governments can actually mandate compulsory licensing and in a way ensure domestic availability through their domestic producers. Of course, the patent holder would need to get some reasonable compensation. So, this is one route.
The second route is what is called voluntary licensing. The patent holder grants a voluntary licence to a manufacturer in India or a seller in India to sell the patented product. Now, world over compulsory licence has been recognised as a very, very important policy flexibility, policy tool available under the TRIPS agreement to facilitate access to affordable medicine.
Now, the India-UK CETA has gone against this grain. While there is a recognition that the IPR chapter will not limit either India or UK's rights and obligations under the TRIPS agreement for compulsory licence, but on the other hand, the agreement also recognises or the agreement specifies that both countries have recognised that the preferable and optimal route to promote and ensure access to medicines is through voluntary mechanisms such as voluntary licensing.
This, to my mind, effectively puts on the back burner the possibility of India resorting to compulsory licensing anytime soon. I do think this is a provision which is likely to see a lot of debate and it will be useful for the government to come out and elaborate why it agreed to such a provision. India has been at the forefront of seeking to utilise or even expand the flexibilities under the TRIPS agreement and here we are in this FTA saying that, sorry, we don't think that flexibility is the preferable or the optimal route.
So, I am really puzzled by this particular provision in the IPR chapter.
Puja Mehra: Are there many such positions traditionally that India had been taking that have been abandoned in this agreement?
Abhijit Das: This position on compulsory licensing is a good illustration. Similarly, India had been consistently opposing issues around labour environment, gender in trade agreements. We've had a very strong resistance to discussing these issues at the WTO.
In the India-UK CETA, we have abandoned those long-held positions. Of course, positions are never cast in stone. These are dynamic.
But there must be some reason for abandoning those provisions. It would be useful if we could identify where we have gained through these chapters on labour environment and gender. I, for one, couldn't find many illustrations or any provisions where we could say that, well, this provision is crafted, this is negotiated for India's benefit.
No, I couldn't find those. So, yes, we have abandoned some of our long-held positions, particularly in the area of non-trade issues, as well as on the compulsory licensing issue related to patents.
Puja Mehra: I suspect we might be doing this because we want to integrate more deeply into global supply chains and this may be a condition for doing that. I wonder what China's position on some of these issues are. Does China have a position closer to India or closer to the developed world?
Abhijit Das: China's position, I would suspect, is closer to the Indian position. I would have a bit of a different perspective. I am unable to see how abandoning compulsory licensing can help us integrate better in value chains.
Similarly, how the provisions on labour and environment can facilitate our integration in global value chains. If we look at the provisions on environment in the IPEF, then those provisions are really crafted more around trying to exclude China from global value chains. So, these provisions could become double-edged weapons as well.
Puja Mehra: Sorry, I didn't understand that. What I was trying to say is that perhaps India is agreeing to some of these positions, abandoning traditional positions, because we are offering to harmonise our rules of business with that of international corporations, large multinational corporations, and probably offering that as something which China does not offer in the whole China plus one narrative.
Abhijit Das: Puja, there is really very little which we are offering through these chapters which can help facilitate our integration in global value chains. That was my short point.
Puja Mehra: Okay, got it. So, on the whole, just to sum up the tariffs, what is being done on the tariff side seems highly positive. But the sense that I get is from our conversation that those gains, potential gains from the tariff reduction, are in some way contingent on the rest of the chapters where a lot of effort from Indian business is required, where the government may help, but there's only so much the government can do.
Abhijit Das: Absolutely true. And if we have to take the complete perspective, then we also have to look at other issues such as government procurement and IPRs and non-trade issues before we come to a conclusion of where this FTA will take the Indian economy. Maybe that's the conversation which is ideally held after a few years.
Puja Mehra: At the moment, it seems from our conversation that net India may not be gaining so much.
Abhijit Das: Let me fine tune that. Net-net, our exports will definitely increase, but the adverse impacts will curtail the government's policy space to pursue catch-up policies. And that adverse impact may not be immediately visible.
That will become evident when there is a need to implement a particular policy, but because of what this FTA contains, the government is unable to do so. That may happen tomorrow, that may happen two years down the line. Two years down the line, people may have forgotten that it's because of this FTA that the government was not able to implement a particular policy.
Puja Mehra: Policies such as, for example?
Abhijit Das: Let's say giving a boost to domestic manufacturers through government procurement. That's a standard policy being used world over, including in developed countries, to give their domestic manufacturers assured orders which help them scale up, which helps them reduce their costs.
Puja Mehra: Right. Although most trade negotiations and discussions around them, when we're talking about India focus on agriculture, we haven't spoken much about agriculture. Before we wind up, do you want to say something on what this agreement has for agriculture?
Abhijit Das: Oh, yes. In agriculture, we have negotiated, I would say, pretty well. We have got tariff reductions on spices, for example, or marine products which may strictly not be agriculture.
But more importantly, we have managed to protect our domestic agriculture from tariff reductions. When it comes to either the export interest or the interest of protecting farmers, I think the government has done an excellent job of protecting the farmers as well as creating opportunities for exports of agri-products, including processed agri-products.
Puja Mehra: Right, right. Thank you. Thank you, Professor Das.
Abhijit Das: Thank you, Puja.
