Tariffs Fell Today. Competitiveness Must Rise Tomorrow

The India-UK Comprehensive Economic and Trade Agreement (CETA), which came into force on July 15, has been celebrated as a watershed in India's trade diplomacy. Duty-free access for nearly 99% of Indian exports, alongside the Double Contribution Convention relieving around 75,000 Indian professionals from dual social security payments, undoubtedly marks a significant achievement. Yet the real question is not whether the agreement opens markets. It is whether India is prepared to convert preferential market access into sustained export competitiveness. Trade agreements lower barriers; they do not eliminate structural weaknesses.

The agreement delivers tangible short-term gains. Indian exports of textiles, garments, leather, footwear, marine products, engineering goods and processed foods now enjoy preferential access to the British market, potentially boosting labour-intensive industries. Simultaneously, tariffs on British Scotch whisky, gin and premium automobiles begin falling, with deeper reductions phased in over the coming decade. Consumers may welcome greater choice and lower prices, but the immediate fiscal implications, particularly for state excise revenues, and the unequal distribution of these benefits deserve equal attention.

Yet the celebration risks obscuring a more fundamental reality. The headline promise of "99% duty-free access" is less transformative than it appears. India's share in UK imports remains barely 1.6%, reflecting challenges that tariffs alone cannot solve. As the Global Trade Research Initiative has cautioned, quality standards, sanitary and phytosanitary regulations, certification requirements, logistics costs, fragmented supply chains and long-established buyer networks remain the real gatekeepers of British markets. Removing customs duties without strengthening India's export ecosystem risks creating impressive headlines but only modest commercial gains. The door has opened; India must still develop the capacity to walk through it.

That challenge is particularly evident for India's MSMEs, which account for a substantial share of exports but often struggle to utilise free trade agreements. Complex rules of origin, expensive certification, documentation requirements, limited awareness and weak testing infrastructure have historically kept utilisation rates of several Indian FTAs well below their potential. Unless exporters receive institutional support to navigate these barriers, preferential tariffs will remain underutilised.

The agreement also raises difficult questions about India's industrial strategy. British firms will gain access to thousands of Indian central government procurement contracts across infrastructure, transport and green energy. Although safeguards exist, relatively flexible origin requirements could expand foreign participation in public procurement. At the same time, phased tariff reductions on machinery, medical devices, auto components and premium manufactured goods will intensify competition for domestic producers. India cannot simultaneously subsidise manufacturing through Production Linked Incentive (PLI) schemes while exposing the same sectors to greater import competition without ensuring corresponding improvements in productivity, innovation and scale. Trade policy and industrial policy must reinforce, not undermine, one another.

Agriculture presents a similarly mixed picture. The exclusion of sensitive products such as dairy, edible oils, apples and cereals reflects prudent protection of vulnerable farming interests. However, the principal export gains accrue to processed foods, seafood and value-added agricultural products, where larger firms possess the capacity to meet demanding international standards. The agreement improves market access for exporters, but it does not automatically integrate millions of small farmers into global value chains. Likewise, negotiated safeguards provide temporary relief for steel exports, yet future British safeguard measures and emerging carbon-related trade regulations could steadily erode today's advantages unless Indian industry accelerates its green transition.

The services chapter reflects ambition tempered by compromise. The social security convention is a meaningful gain for Indian professionals on temporary assignments. However, deeper liberalisation of digital trade, financial services, mutual recognition of professional qualifications and cross-border data flows remains limited. In an economy increasingly driven by knowledge and services, these omissions reduce the agreement's transformative potential.

CETA is also a product of geopolitical convergence. Post-Brexit Britain urgently sought reliable trade partners, while India aimed to diversify export destinations amid growing protectionism and geopolitical fragmentation. The strategic logic is compelling. But diplomacy can only create opportunities; it cannot substitute for domestic preparedness. Competitiveness is built in factories, laboratories, logistics networks, ports, testing facilities and skilled workforces, not at negotiating tables alone.

As implementation begins, policymakers should resist measuring success through tariff schedules or optimistic projections of future trade volumes. The real test lies in utilisation rates, export diversification, manufacturing resilience, employment generation and the ability of Indian firms, especially MSMEs, to compete globally. Continuous monitoring of sectoral impacts, timely safeguard measures against disruptive import surges, investment in standards and logistics, and regular reviews of the agreement's implementation will determine whether its promises translate into tangible outcomes.

Trade agreements are ultimately judged not by the number of tariffs they eliminate but by the industries they strengthen, the jobs they create and the competitiveness they inspire. CETA has lowered customs barriers. India's harder task begins beyond the customs gate.