India exports $140 million worth of goods duty-free to UK on Day 1 of trade pact

India exported goods worth $140 million to the United Kingdom at zero duty on the first day of the India-UK Comprehensive Economic and Trade Agreement (CETA), which came into effect on Wednesday, marking the formal rollout of one of New Delhi's most ambitious trade deals.

Commerce Secretary Rajesh Agrawal said the agreement between the two complementary economies would deepen bilateral economic ties and open new opportunities for Indian exporters.

Calling CETA one of India's most aspirational trade agreements, Agrawal said more than 800 technical sessions spread over 14 rounds of negotiations were held before the pact was finalised.

On the first day of implementation, over 50 export consignments valued at more than $140 million were dispatched from over 20 ports, airports, Inland Container Depots (ICDs), Special Economic Zones (SEZs) and manufacturing facilities across the country. The shipments included electronics, pharmaceuticals, gems and jewellery, and other products exported through key hubs such as Mundra, Nhava Sheva, Chennai, Mumbai, Kolkata and Hyderabad.

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Under the agreement, nearly 99 per cent of Indian exports receive duty-free access to the UK market, benefiting sectors including leather, footwear, textiles, engineering goods, plastics, base metals, marine products and gems and jewellery, which previously faced tariffs ranging from 2 to 16 per cent.

Speaking on the occasion, Lindy Cameron, British High Commissioner to India, said the agreement is expected to increase bilateral trade by over 25 billion pounds annually over the long term and contribute nearly 5 billion pounds annually to the GDP of both the UK and India.

Government procurement opens new opportunities

GOVERNMENT PROCUREMENT (GP) ————————————— The pact includes a chapter on government procurement, which provides Indian suppliers legal access to the UK government procurement market worth around GBP 90 billion (USD 122 billion).

India offers reciprocal opportunities of around USD 114 billion to the British market.

UK suppliers receive treaty-backed access to covered central government procurement in India, and firms meeting a 20 pc UK-content threshold may qualify as Class 2 Local Suppliers.

Explaining the issue, Additional Secretary in the Department of Commerce Darpan Jain said that a number of safeguards are in the pact to protect the interests of domestic MSMEs.

”India reserves the right to grant preferential treatment to its MSMEs as per its policy. So that is not affected,” he said, adding that the GP commitments are not applicable at the state level.

Even at the central government level, he said, it is not applicable across all departments, PSUs and entities.

”There are selected entities to which it is applicable,” Jain said, adding that in strategic sectors, the UK firms will not be allowed.

The fourth safeguard is that there is a minimum threshold under which UK firms can participate in government procurement contracts valued at more than Rs 5.5 crore.

For activities like construction contracts, the threshold is over Rs 60 crore.

INTELLECTUAL PROPERTY RIGHTS (IPRs) ——————————————— On concerns with regard to IPRs by certain quarters, Jain said there is nothing in the agreement which says the Indian government cannot use compulsory licensing (CL).

As per the WTO (World Trade Organization) agreement, a CL can be invoked by a national government, allowing someone else to produce a patented product or process without the consent of the patent owner in the public interest.

Only one CL has been issued by India so far for the cancer drug Nexavar (2012), and that too under exceptional public health circumstances.

CARBON BORDER ADJUSTMENT MECHANISM (CBAM) ——————————————————– India and the UK are engaged in discussions on this issue.

In December 2023, the UK government announced that it would implement its Carbon Border Adjustment Mechanism (CBAM) starting in 2027.

According to economic think tank GTRI, India’s exports worth USD 775 million to the UK may be impacted due to Britain’s decision to introduce a carbon tax on products, like iron and steel, aluminium, fertiliser and cement, from 2027.

An official said that this regulation is contested by some people in the UK also.

”They also have people who are saying it is required, some people saying it is not required. So, they are still deliberating upon this. They have not yet taken a final view on it,” the official said.

”But we have made it very clear. Whenever you (UK) take a final view, if it affects our exports, then we would definitely seek an adjustment. And we are engaged with them on the issue,” the official added.

The pact provides that if the UK imposes a carbon tax in the future and it adversely affects India’s exports, New Delhi may withdraw certain concessions.

CHAPTERS ON GENDER, SME, ENVIRONMENT, LABOUR ———————————————————— When asked if the inclusion of these chapters in the pact affects the policy space of India, Jain said there is no dispute settlement in these chapters.

”So, the UK cannot take us to dispute that you are not doing this, you are in violation of this,” he said, adding ”all our laws, whether in gender or labour or in environment, all our laws are actually aligned to whatever international treaties we are agreeing to”.

The official said there is nothing to worry about as India is doing much more than other countries on these matters.

”Our policies are more progressive,” the official added.

With inputs from agencies