Sector Spotlight: Who Wins Big in the India–UK Trade Pact
The India–UK Comprehensive Economic and Trade Agreement (CETA) is more than just a trade pact, it is a game-changer for Indian exporters. With steep tariff cuts, improved market access, and facilitation in services and mobility, the deal is set to unlock targeted growth in high-potential sectors. Industries where every percentage point of duty can make or break a deal, from textiles and leather to engineering goods and processed foods, this deal could tilt the playing field in favor and stand to gain a competitive edge in the UK market. When exports rise because of a trade deal, two indirect-tax realities immediately follow. First, exporters will generate higher unutilized input tax credits (ITC) at the domestic stage and will rely more on IGST refunds and zero-rated procedures to recover that cash. Second, schemes such as Remission of Duties and Taxes on Exported Products (RoDTEP)/Rebate of State and Central Taxes and Levies (RoSCTL) become more valuable because they refund non-creditable duties and levies which directly improve exporters’ cash flows and unit economics. The sectoral winners which could capitalize on the India–UK CETA are mapped herein below:
Highest gaining sectors
Textiles, Apparel and Fashion (Highest Visible Gain)
Textiles and apparel are labor-intensive, price-sensitive, and face significant tariff competition in developed markets. Even small duty reductions can change buying decisions and open new large contracts for volume suppliers. Over the years, the UK market has already seen imports in sizeable quantities of textiles from India. With the CETA, many clothing categories are set to face lower UK import duties, thus improving margin competitiveness. Industry groups and trade bodies have specifically flagged textiles as a principal beneficiary.
The UK factsheet records growing bilateral trade and highlights fashion as a headline sector. We can expect export order books for both mass apparel and premium heritage categories (handloom, artisanal work) to expand in the next 12–36 months window, thus encouraging more partnerships between Indian apparel manufacturers and UK brands.
Gems and Jewelry (Value Play + Origin Rules)
Gems and jewelry are high-value, low-weight goods where duty changes materially alter landed cost and competitiveness. London has long been one of the world’s largest jewelry and diamond trading hubs. Tariff relief or preferential treatment under Rules of Origin (ROO) will encourage Indian cutters, polishers and branded jewelry houses to step up exports.
Pharmaceuticals and Fine Chemicals (Margin + Regulatory Access)
India is a global supplier of generic medicines and APIs. The UK’s demand for affordable generics and its sophisticated healthcare procurement systems make pharmaceuticals a natural CETA beneficiary, particularly where regulatory alignment and mutual recognition can speed market entry. Such CETA concessions combined with services mobility (professional movement of doctors) can help contract research and clinical trial services tied to pharma exporters.
Engineering Goods and Automobiles (Scale + Structural Change)
Engineering goods from capital machinery to automotive components are India’s largest merchandise export sector by value. The CETA’s tariff reductions (and, in some cases, quota arrangements) can make Indian components and certain Indian-built cars (like Tata, Mahindra & Mahindra, and Maruti-Suzuki) more competitive in the UK market. The agreement’s reported cut in automobile duties (with quota modalities) could incentivize new export models.
Engineering goods typically account for a large single-digit to double-digit share of India’s goods exports.
Leather and Footwear (Labor-Intensive, ROO Friendly)
Leather and footwear are classic winners from trade deals because tariff savings directly feed retail pricing. India is a global player in leather goods and can scale exports to the UK fashion market, particularly for mid-market branded footwear. Trade bodies already expect gains for this cluster.
Marine Products, Agro-food and Processed Foods (Niche + High Demand)
British consumers exhibit a sustained demand for specialty food items and processed food products. Under the CETA, the progressive reduction or elimination of applicable customs tariffs, coupled with the potential streamlining and mutual recognition of Sanitary and Phytosanitary (SPS) measures, is expected to significantly enhance market access for Indian exporters. In particular, exporters engaged in the supply of seafood, spices, ready-to-eat packaged foods, and other specialty agricultural commodities are likely to derive substantial commercial benefit. Furthermore, as numerous agricultural tariff lines already fall within the ambit of the RoDTEP scheme, the continued budgetary allocation by the Government of India towards RoDTEP (currently valid till 30 September 2025) serves as a policy signal of sustained fiscal support to this sector, thereby further improving the competitiveness of Indian exports in the UK market.
Electronics and IT services (Services Angle + Embedded Goods)
While trade in goods is expected to capture the primary headlines, the export of services continues to represent India’s comparative advantage in bilateral commerce. The CETA incorporates binding commitments on cross-border trade in services, including provisions aimed at facilitating the temporary movement of natural persons (Mode 4 supply), mutual recognition of professional qualifications, and enhanced market access for service providers. These measures have the potential to materially augment India’s exports in the Information Technology (IT), Business Process Outsourcing (BPO), and Knowledge Process Outsourcing (KPO) sectors to the UK, while also enabling Indian professionals to access short-term work opportunities in the UK market with reduced procedural barriers.
A Possible Global Supply Chain Redesign
One major opportunity arising due to this CETA is routing of UK origin goods via India to take advantage of preferential access for onward export or regional distribution. Businesses can evaluate the feasibility of setting up or partnering with low-cost contract manufacturing hubs in India, for goods meant for exports to the UK market subject to the ROO thresholds.
Checklist For Turning the CETA into a Competitive Advantage
- IGST Refunds and Cash Flow: Higher export volumes will naturally push up IGST refund claims, and if refunds are delayed, short-term working capital pressures could arise. Businesses should tighten refund processes by reconciling export invoices with ICEGATE filings on a regular basis and eliminating any documentation gaps that could trigger scrutiny. For sectors with long project cycles such as heavy equipment or capital goods, IGST refund timelines should be factored into cash-flow projections so that funding gaps do not derail execution.
- Export Incentives (RoDTEP/RoSCTL): Labor-intensive product lines continue to be eligible for RoDTEP or RoSCTL benefits, which means exporters should map each SKU to its corresponding RoDTEP rate and to the CETA’s tariff concessions. This mapping will allow companies to quantify the per-unit after-tax price advantage and feed that directly into pricing strategies for both tenders and existing customer contracts, ensuring that benefits are not lost in margin compression.
- ROO Compliance: To qualify for preferential tariffs under the trade pact, products must meet substantial processing or value-addition thresholds. Companies should review and align supplier agreements to include clear origin clauses, maintain documentation to prove value addition (particularly for subcontracted production), and where necessary, seek advance rulings to remove ambiguity in origin or classification. Accurate classification is not just a customs duty requirement it will also be critical for claiming export incentives.
- Supply Chain and Contract Structuring: Exporters should revisit place-of-supply rules, GST implications for contract manufacturing or subcontracting, and invoicing terms to ensure that tax treatment is optimized. Bonded warehouses, FTWZs, or light processing hubs may be used strategically to meet ROO requirements while maintaining cost efficiency. In the case of services exports, contract terms should be reviewed to address GST place-of-supply, reverse charge applicability, and potential UK VAT obligations so that after-tax competitiveness is preserved.
- Operational and Regulatory Delays: For sectors such as marine products and processed foods, SPS compliance and export documentation can create bottlenecks that delay shipments and refund claims. These timelines should be budgeted into operational plans, and wherever possible, compliance documentation should be prepared and cleared in advance to avoid demurrage and missed delivery schedules.
- Tax Modelling: Companies should re-price contracts after factoring in the combined impact of RoDTEP incentives, IGST refunds, and the revised UK duty structures. This will provide customers with accurate landed cost calculations and allow exporters to capture early pricing advantages, rather than letting competitors undercut them once the market adjusts to the new tariff environment.
The India–UK CETA sets up a multi-sector opportunity: textiles, gems and jewelry, pharmaceuticals, engineering goods, leather, marine products and services each have specific, quantifiable upside. But the advantage goes not to the sector but to companies that translate tariff relief into real pricing, operational changes, and rigorous compliance. From an indirect-tax viewpoint, the twin levers of IGST refunds and RoDTEP will be the primary mechanisms that convert export volumes into better cash flows. Companies that prepare early by mapping HS codes, availing advance rulings, and redesigning supply chains where needed will definitely capture the lion’s share of incremental gains.