The UK–India trade deal’s real test is whether firms can use it

The UK–India Comprehensive Economic and Trade Agreement entered into force on 15 July. India’s Commerce Ministry reported that more than 50 consignments, worth over US$140 million, were flagged off under the preferential regime on the first day. It also issued the first certificates of origin through its electronic platform. Those are useful signs that the system can handle real shipments. The economic question is how many firms will keep using it after the launch, and whether lower duties generate orders that would otherwise have gone elsewhere. India’s Ministry of Commerce and Industry, 15 July release · UK Department for Business and Trade, 15 July release

The deal deserves support. It makes the UK more accessible to Indian manufacturers in sectors such as clothing, textiles and footwear, where export demand can support employment. The priority for New Delhi should now be to make the tariff preference cheap and predictable to claim, then measure whether orders, volumes and employment actually follow. The headline coverage figure tells firms where an opportunity exists. The cost of using the agreement will determine how widely that opportunity is taken up. UK Department for Business and Trade, impact assessment · CETA Chapter 3 and its rules of origin

The starting point is a services-heavy trading relationship

The UK’s June trade factsheet puts bilateral trade in goods and services at £47.9 billion in the four quarters through December 2025. That was 10% higher than the previous four quarters in current prices, before CETA entered into force. From the UK’s perspective, services accounted for £17.5 billion of its £28.7 billion of imports from India, or about 61%. Goods imported from India amounted to £11.2 billion. These are observed trade flows. The two economies already had an expanding commercial relationship against which future changes have to be judged. UK Department for Business and Trade, June 2026 bilateral factsheet

UK-reported trade through Q4 2025	Goods	Services
UK imports from India	£11.2 billion	£17.5 billion
UK exports to India	£5.9 billion	£13.3 billion

The British government’s impact assessment models bilateral trade about £25.5 billion a year higher in the long run, approximately 39% above its projected no-agreement baseline. It estimates India’s long-run GDP level about 0.06% higher and the UK’s about 0.13% higher. The pound values use projections for 2040. These estimates depend on how households and firms adjust to the agreement, including whether lower barriers are used in practice. The large percentage effect on bilateral trade can coexist with a modest GDP effect because two-way trade is only one part of either economy. UK Department for Business and Trade, impact assessment

A tariff preference is worth its margin after compliance

India’s Commerce Ministry describes zero-duty access for nearly 99% of its exports to the UK. For an individual supplier, the economically relevant figure is the margin over the duty that would otherwise apply. A product already entering duty-free offers little immediate tariff saving. A product facing a meaningful duty can be much more attractive to a UK buyer once its eligibility is established. Comparing tariffs at the product level matters because exporters competing with suppliers that already enjoy preferential access can gain a great deal from closing even a modest tariff gap. India’s Ministry of Commerce and Industry, 15 July release · CETA Chapter 2 and tariff schedules

Origin rules determine whether a product qualifies. The treaty defines when a good counts as originating and provides product-specific rules. A garment assembled in India from imported fabric may face a different qualification test from a garment whose inputs and production are traceable to domestic suppliers. Checking that test, collecting documentation and allocating staff time all carry a cost. The UK Parliament’s Business and Trade Committee identified compliance costs and complicated origin rules as reasons smaller companies may use the agreement less. India’s digital origin process is a promising first step. Exporters will still need predictable answers when a product’s eligibility is unclear. CETA Chapter 3 and its rules of origin · India’s Ministry of Commerce and Industry, 15 July release · House of Commons Business and Trade Committee, CETA scrutiny report

Consider an illustrative shipment valued at £10,000 that can save eight percentage points of duty. Its gross duty saving would be £800. If the exporter and importer incur £300 in additional verification, documentation and delay costs, the combined saving falls to £500. A shipment of £2,500 facing the same tariff margin would save £200 and could be uneconomic to claim at the same fixed cost. The rates and expenses in this example are hypothetical. The example identifies a practical target for policy: reducing the cost of the first successful claim makes it easier for a smaller firm to compete for a trial order.

Lower import duties have several claimants

India’s tariff schedule lists a 150% base rate for Scotch whisky under tariff line 22083092, a 75% preferential rate at entry, and a staged reduction to 40%. On a stylised customs value of ₹10,000, duty at the base rate is ₹15,000 and at the initial preferential rate it is ₹7,500. The customs value plus that tariff alone falls from ₹25,000 to ₹17,500, a 30% reduction in this simplified calculation. The example excludes other applicable taxes, freight changes and distribution costs. It also assumes that the shipment qualifies for the preference. India’s tariff schedule, row 1587, tariff line 22083092 · India’s Notification No. 29/2026-Customs, 14 July

The ₹7,500 saving can be divided among the UK supplier, the Indian importer, distributors and consumers. Its allocation depends on bargaining power and competition. Where consumers can easily switch brands and several importers compete, more of the cost reduction may reach retail prices. With limited distribution or strong brand power, suppliers and distributors can retain more of it. The Indian Treasury’s receipts depend on the lower rate and how quantities respond. Domestic producers can face greater competition even when retail prices adjust gradually. Comparing customs duties with actual wholesale and retail prices would show which channel mattered most.

Passenger cars show a different constraint. India’s concession for eligible UK vehicles is structured around tariff-rate quotas and staging, with details that vary by vehicle category. The size and use of the quota affect how far the concession changes competition in practice. If demand exceeds the quota, access to the lower rate can itself have commercial value. Published quota allocations, fill rates and effective duties would make it easier to see whether the main benefit reaches car buyers, overseas producers or the firms with access to the quota. CETA Chapter 2 and tariff schedules · UK Department for Business and Trade, impact assessment · House of Commons Business and Trade Committee, CETA scrutiny report

Services need their own scorecard

The Double Contributions Convention came into force alongside CETA. It addresses duplicate social-security contributions for eligible employees temporarily posted from one country to the other. That can lower the cost of a time-limited assignment and make it easier for a firm to send staff to implement a project. Eligibility for the contribution arrangement and permission to enter and work are separate questions. Professional licensing and the customer’s ability to buy the service also shape whether a consultancy, engineering firm or technology provider can turn treaty access into revenue. India’s Ministry of Commerce and Industry, 15 July release · UK government, Double Contributions Convention explainer · CETA Chapter 10, temporary movement

That matters because services already account for a majority of what the UK records as imports from India. A goods-only dashboard could capture the most visible changes and miss an important channel. Services evaluation should track the use of eligible temporary assignments, regulatory barriers reported by firms, and receipts for relevant services. Changes in how a project is delivered can matter even when the value of recorded trade takes time to respond. UK Department for Business and Trade, June 2026 bilateral factsheet · CETA Chapter 10, temporary movement

How India can tell whether the agreement delivered

The first indicator should be preference utilisation by product, shipment size and firm size. Take the value of eligible trade that claims the preference and divide it by the value of trade eligible for the preference, with the eligibility rule and tariff basis stated. Show how many firms are making a first claim and how many return with a second shipment. Pair these figures with median clearance times and the most common reasons claims are rejected. That would tell policymakers whether a poorly used concession reflects little commercial demand or an avoidable administrative cost. House of Commons Business and Trade Committee, CETA scrutiny report · CETA Chapter 27, Administrative and Institutional Provisions

The second test is additional trade. A credible evaluation would compare products receiving large tariff cuts with similar products receiving small or zero cuts. It should account for pre-existing trends, changes in sterling against the rupee, UK demand and product-specific price changes. A second comparison can use Indian exports of the same products to markets without the same tariff change. Examine both quantities and the number of exporters so that higher prices or larger shipments by established firms do not obscure whether new suppliers entered. Neither comparison by itself guarantees a causal estimate: the products receiving the deepest cuts may differ systematically from the rest.

The strongest argument for optimism is that the deal makes future access more predictable, allowing suppliers to invest in meeting buyer requirements before the first visible increase in exports. That could be more valuable than the immediate duty saving. It should show up over time in repeat orders, wider participation and investment by firms that previously struggled to enter the UK market. If utilisation remains concentrated among large incumbent exporters, India should simplify origin guidance, address recurring clearance problems through the treaty’s committees and direct practical support toward smaller suppliers. The agreement has created an opening. The next job is to find out how many Indian firms can walk through it. CETA Chapter 3 and its rules of origin · CETA Chapter 27, Administrative and Institutional Provisions