India–UK CETA: A Turning Point for Trade and Banking Growth
On 29 July 2025, India and the United Kingdom signed the Comprehensive Economic and Trade Agreement (CETA), marking a historic milestone in the economic partnership between the two countries. This agreement comes at a time when India is aiming to integrate more deeply with global markets and the UK is seeking to strengthen its post-Brexit trade architecture. Together, these two democracies have unlocked a framework that not only addresses tariffs and trade in goods, but also services, investments, mobility, and institutional cooperation. For India, the deal holds the promise of a stronger export trajectory and expanded opportunities for its micro, small and medium enterprises (MSMEs). For the banking sector, it represents a chance to anchor itself more firmly as a growth partner in international trade and corporate finance.
The Promise of Tariff Elimination
One of the most important provisions of the CETA is the near-elimination of tariffs between India and the UK. India will now enjoy tariff-free access for almost 99 percent of its exports to the UK. This includes labour-intensive industries such as textiles, leather goods, gems and jewellery, marine products, and engineering goods, which have traditionally been subjected to tariff barriers in the UK. For exporters in these categories, the removal of tariffs translates into direct cost advantages, making their products more competitive in global markets.
Take, for example, the Indian textile and apparel sector. The UK is one of the top destinations for Indian garments, yet tariffs often made Indian exports costlier than those from competing countries such as Bangladesh or Vietnam. With tariffs gone, Indian textile exporters can now offer better prices without compromising on margins. This will likely lead to an expansion in orders, higher capacity utilization in manufacturing units, and, crucially, greater employment generation in regions where textiles form the backbone of the local economy.
According to recent trade figures, India’s exports to the UK stood at US$14.55 billion in 2024–25, reflecting a growth of 12.09 percent from the previous year. With CETA in force, this growth trajectory could accelerate sharply. This graph visually reinforces the upward export trend.
Expanding Opportunities for MSMEs
The MSME sector in India, which contributes nearly 40 percent of exports and employs millions, is poised to be one of the biggest beneficiaries of the agreement. MSMEs often operate on thin margins and are highly sensitive to changes in trade costs. By removing tariffs, the CETA reduces the landed cost of Indian goods in the UK, giving MSME exporters a critical price edge.
But the benefits go beyond just cost competitiveness. Many MSMEs, particularly in textiles, handicrafts, processed foods, and leather, cater to niche segments of the UK market. With tariffs eliminated, these enterprises can now scale up their exports more easily. Moreover, the CETA provides institutional mechanisms for information sharing, such as contact points for MSMEs in both countries. This ensures that small businesses are better informed about market regulations, certifications, and opportunities. For instance, an MSME producing eco-friendly leather goods in Kanpur will find it easier to understand UK compliance requirements and access B2B trade promotion events facilitated under the agreement.
This boost to MSMEs also has a multiplier effect on banking. Since small businesses often require working capital, export credit, and risk management services, banks will find an expanded customer base demanding trade finance products. In fact, one can reasonably expect export-oriented MSMEs to turn increasingly towards formal banking channels for financing their growth, which will deepen financial inclusion.
“Sectoral Composition of India’s Exports to the UK (2024)”
Marine Products, Pharmaceuticals, and Engineering: Rising Export Stars
Among India’s diverse export sectors, marine products hold particular promise. India exported marine goods worth US$8.09 billion in 2022–23, with shrimp and cuttlefish being major components. The UK, with its large Indian diaspora and strong demand for seafood, is an attractive destination. Tariff elimination under CETA makes Indian seafood more price-competitive and enhances the earning potential of exporters. This will directly benefit coastal economies in states like Andhra Pradesh, Kerala, and Gujarat, where marine exports are a major livelihood source.
Pharmaceuticals and chemicals are another sector to watch. India is already a global leader in generic medicines and enjoys strong trust in the UK market. With tariff-free access, Indian pharma companies will find it easier to penetrate deeper into the British healthcare supply chain. This aligns with the UK’s need to ensure affordable healthcare costs post-Brexit, creating a win-win situation. Similarly, India’s engineering goods and machinery exports, which cater to industries ranging from automotive to power equipment, will see higher demand as UK tariffs reduce significantly. This can catalyse new investments in India’s engineering hubs such as Pune, Ludhiana, and Coimbatore.
Services Sector and Professional Mobility
While much of the public discourse around trade agreements focuses on goods, the services sector is no less important, especially for India. The CETA creates new opportunities for Indian IT, ITeS, finance, and education services by providing easier access to the UK market. Indian professionals will find smoother pathways to work in the UK, supported by provisions on mobility and tax exemptions for social security contributions for up to three years.
This is significant for two reasons. First, India’s services exports to the UK—already substantial—will gain momentum as restrictions ease. Second, the mobility provisions will encourage Indian firms to deploy talent overseas without facing prohibitive compliance costs. For the banking industry, this increased movement of professionals creates new avenues in remittances, cross-border payroll services, and overseas banking support.
The UK, on its part, gains better access to India’s financial and education sectors. British universities can more easily collaborate with Indian institutions, while UK financial firms can tap into India’s fast-growing financial ecosystem. This exchange of services will lead to greater integration of the two economies and richer banking interactions.
Investments and Public Procurement: A Wider Canvas
Beyond goods and services, the CETA also addresses investments and procurement. UK companies will now be eligible to participate in India’s public procurement markets for non-sensitive sectors, which are valued at over £38 billion annually. This creates opportunities for UK firms in infrastructure, clean energy, and services. For Indian banks, such participation means increased demand for project finance, guarantees, and treasury services.
Conversely, Indian companies investing in the UK will benefit from clearer frameworks and dispute-resolution mechanisms. The deal strengthens investor confidence, which is critical for long-term capital flows. As investment linkages grow, banks on both sides will find increased demand for advisory services, cross-border financing, and capital markets access.
Projected Impact on Trade and GDP
The macroeconomic benefits of CETA are compelling. Bilateral trade between India and the UK currently stands at around US$56 billion, but both governments have projected this to double to US$112 billion by 2030. According to KPMG, the deal could add £4.8 billion annually to UK GDP and expand bilateral trade by £25.5 billion. For India, the government estimates that duty-free access could unlock US$23 billion worth of new export opportunities.
The rationale behind these figures lies in the scale of tariff reduction. For example, average tariffs on British goods entering India are expected to fall from 15 percent to just 3 percent. Iconic British exports like whisky, which faced 150 percent tariffs, will now be taxed at 75 percent initially and 40 percent over a decade. On the other hand, Indian textiles, marine products, and engineering goods will face zero tariffs in the UK, driving higher export volumes.
This bar chart demonstrates visually how trade is expected to double by 2030, making the economic impact of CETA
Tarrif on export goods pre and post implementation of CETA
| Various Products | Pre FTA Duty Range | Post FTA Duty |
| Processed Food | upto 70% | 0% |
| vegetable Oil | Upto 20% | |
| Transport/Auto | Upto 18% | |
| Leather/Footwear | Upto 16% | |
| Electrical Machinery | Upto 14% | |
| Textile/Clothing | Upto 12% | |
| Wood/Paper | Upto 10% | |
| Base Metals | Upto 10% | |
| Mechanical Machinery | Upto 8% | |
| Mineral | Upto 8% | |
| Chemicals | Upto 8% | |
| Plastic/Rubber | Upto 6% | |
| Gems & Jewellery | Upto 6% |
Banking Sector: The Financial Backbone of CETA
Trade cannot expand without finance, and this is where Indian banks find themselves at the heart of the CETA opportunity. The growth of exports in sectors such as textiles, marine products, and engineering will directly increase the demand for trade finance instruments such as letters of credit, bills of exchange, and export credit. With larger volumes of goods moving across borders, banks will also see higher foreign exchange transactions, boosting fee-based income.
Corporate banking is another area of growth. As Indian firms expand exports or set up operations in the UK, they will require working capital, term loans, and treasury services. Similarly, UK companies entering India under the CETA framework will require local financing partners. This mutual demand creates opportunities for Indian banks to form partnerships with UK institutions, expand representative offices abroad, and even explore joint ventures.
The agreement also has implications for capital markets. London remains one of the world’s leading financial hubs, and Indian corporates looking to raise funds internationally may increasingly turn to London for listings or bond issuances. Indian banks with investment banking arms can facilitate these transactions, earning fee income while strengthening India–UK financial integration.
MSMEs once again stand out as a special case. While the CETA opens doors for them to enter the UK market, many lack the financial muscle to manage international trade risks. Here banks can play a developmental role by offering specialized MSME export finance products, hedging solutions against currency volatility, and digital platforms for easier transactions. By tailoring their offerings to the needs of smaller exporters, banks can help MSMEs thrive internationally while securing a steady stream of new clients.
Conclusion: A Defining Economic Moment
The signing of the India–UK CETA on 29 July 2025 is more than just a trade agreement. It represents a strategic alignment of two economies that share history, common values, and complementary strengths. By eliminating tariffs, easing services trade, enhancing investment flows, and creating institutional support for MSMEs, the agreement promises to double bilateral trade within five years. For India, it means new export opportunities worth billions of dollars, stronger employment prospects in labour-intensive sectors, and deeper integration into global supply chains.
For the banking sector, CETA is a golden opportunity. Every new export consignment, every investment flow, every remittance, and every corporate expansion generated by this agreement will pass through the channels of banking and finance. Banks that respond proactively, by innovating, scaling up, and forging international partnerships will not only gain business but also play a pivotal role in transforming the CETA vision into economic reality. In essence, this trade agreement is as much about financial intermediation as it is about goods and services, and banks are set to be the silent yet powerful engines that drive this new era of India–UK cooperation.
Authored By:
Gaurang Aggarwal
Chief Manager & Faculty
Union Bank of India
Union Learning Academy, Corporate & Treasury, Gurugram
