India will try to replicate U.K. deal’s pro-MSME features in future trade deals

Indian negotiators are trying to ensure future trade agreements, such as those with the U.S. and the EU, include similar carved-out features to benefit Indian micro, small, and medium enterprises (MSMEs) along the lines of what was included in the recently signed agreement with the U.K., according to Commerce Ministry officials.

“The primary goal is to enhance cooperation and information sharing to improve the ability of MSMEs to participate in bilateral trade and investment,” an official in the Ministry of Commerce and Industry told The Hindu on the condition of anonymity as negotiations for a trade deal with the U.S. and the EU are still ongoing. 

The Comprehensive Economic and Trade Agreement (CETA) between India and the U.K., signed last week, included a specific dedicated chapter on SMEs, which India had argued for, the official explained. 

Among the key features included in the India-U.K. CETA that MSMEs stand to benefit is the provision for the establishment of an MSME contact point in both countries, the sharing of information on regulations, certifications and market opportunities, and provisions for cooperation on trade promotion activities, including exhibitions and business-to-business (B2B) events.

When it comes to public procurement, U.K. suppliers looking to bid for Indian government contracts will be treated as  ‘Class-II local suppliers’ in domestic tenders above agreed thresholds, while Indian suppliers, including MSMEs, will continue to receive preferential treatment as ‘Class-I local suppliers’. 

“India is trying to include such carve-outs for MSMEs in ongoing trade deal discussions as well, as safeguarding our MSMEs is a priority,” the official said.

The CETA also includes a mechanism for addressing non-tariff barriers that disproportionately affect MSMEs. 

“The labour-intensive sectors that have been the focus in CETA are textiles, footwear, leather products, marine products, toys, sports goods, and gems and jewellery,” Rumki Majumdar, Economist at Deloitte India, explained. “These sectors are not only labour-intensive but also have a huge contribution from the MSME sector.” 

According to Ms. Majumdar, the export share of these sectors was 24.6% in 2024-25, down from 30.4% in 2018-19. 

“Therefore, free access to the U.K. market will give a big thrust to these sectors, which in turn will have a multiplier effect on jobs and income as well as across rural and semi-urban MSME sectors,” she added.

The CETA also encourages technical cooperation to enhance MSME capabilities, the setup of workshops and training programs on standards, sustainability, and export readiness, and joint efforts by the two countries to promote women-owned and rural MSMEs.