Council on Energy, Environment and Water Integrated | International | Independent
In a significant diplomatic and economic milestone, India and the United Kingdom signed a Comprehensive Economic and Trade Agreement (CETA) in July. The deal stands out both for its scope and its forward-looking emphasis on the clean energy transition—a critical pillar in India's development agenda. Over the past five years, India has maintained a positive trade balance with the UK. Exports rose from USD 8.74 billion in 2019–20 to USD 14.55 billion in 2024–25, growing at a compound annual rate of 10.73 per cent. Imports also grew, but at a more modest 5.11 per cent, reaching USD 8.61 billion in 2024–25. Overall, trade in goods and services between the two countries surpassed GBP 40 billion in 2024.
This agreement signals a new template for how India can approach trade partnerships: as instruments of both economic strategy and environmental cooperation.
The CETA aims to reduce trade barriers and increase market access by embedding modern provisions on investment protection, regulatory transparency, digital trade, and the mobility of skilled professionals, while integrating commitments on sustainable development. It eliminates tariffs on approximately 99 per cent of tariff lines, significantly enhancing market access for Indian exporters, and simplified rules of origin to further streamline trade. At its core is a dedicated Environment Chapter, which reaffirms both countries’ climate commitments under the Paris Agreement and promotes trade and investment in environmental goods and services. A complementary Government Procurement Chapter ensures fair, non-discriminatory access to public tenders for firms from both countries. At the frontier of cooperation, the Innovation Chapter supports joint research, technology transfer, and co-development of advanced energy solutions. Together, these provisions lay the groundwork for sustained collaboration in emerging domains such as green hydrogen, electric mobility, and battery storage.
India has traditionally been cautious in signing free trade agreements (FTAs), viewing them more as diplomatic tools than economic levers. But lately, the global trade environment has grown increasingly fragmented, shaped by geopolitical tensions and supply chain disruptions. Especially after the tariff escalations from the US, which exposed the vulnerabilities of overdependence on fewer markets, FTAs are no longer optional, they are strategic necessities. For India, which is working to build a resilient and sustainable energy economy, it is essential to diversify trade relationships and secure access to clean technologies, critical minerals, and climate finance. The India–UK CETA responds to this moment, offering a reliable, interest-aligned partnership supporting economic growth and the energy transition.
India's ongoing negotiations with the EU, US, and Chile have been hindered or stalled by structural challenges. Aligning India’s development priorities with the regulatory and political expectations of these countries has proven difficult. For example, the India–EU FTA, under negotiation since 2007, continues to face disagreements over carbon taxation, intellectual property rights, and labour standards.
Even with relatively smaller partners like Chile, India encounters delay in expanding preferential access, especially for sectors like lithium mining, clean technology, all vital for India’s clean energy goals. These delays reveal how difficult it is to reconcile advanced regulatory frameworks with India’s domestic policy space. The India–UK CETA, in contrast, appears to have succeeded where others have stalled. Its structure reflects a clear understanding of mutual priorities, especially in clean energy cooperation and technology transfer.
The agreement includes a forward-looking chapter on public procurement, which expands market access for UK firms in Indian sectors like health, education, energy and infrastructure, and vice-versa. It also facilitates the flow of advanced technologies into India. This includes energy-efficient turbines, smart grid technologies, and storage solutions that are essential for modernising India’s energy infrastructure.
Crucially, the deal goes beyond goods. It creates space for joint research and development in hydrogen and battery storage, strengthens circular economy practices, and supports better traceability and risk management across supply chains for critical minerals. The deal has pushed the ceiling on deep tech cooperation, making the CETA one of the most comprehensive trade deals India has signed in the clean energy space.
To build on the momentum from the India–UK CETA and strengthen its bilateral trade readiness, India should:
What does the CETA signal for India’s global trade future?
The broader lesson from the India–UK FTA is that future trade deals need not view economic growth and climate action as competing priorities. By embedding sustainability into the core of its trade architecture, India has shown that FTAs can be instruments of both economic diplomacy and environmental leadership. As India looks to conclude other key trade agreements, the approach taken with the UK offers a useful model—one that prioritises alignment, preparation, and sustainability. With the right strategy, India can shape a new era of climate-conscious trade that supports inclusive, long-term growth.
Aarathi Srinivasan is a Programme Associate at the Council on Energy, Environment and Water (CEEW). Please send the comments to aarathi.srinivasan@ceew.in.
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