The story so far: The India-U.K. Comprehensive Economic and Trade Agreement (CETA) came into force on July 15, 2026, cutting tariffs on 99% of Indian exports and loosening some mobility rules for professionals. But, as even Commerce Minister Piyush Goyal has said in the past, problematic issues have been left out of the deal, leaving the trade deal to include only those where there was agreement. There are three such key issues that remain unaddressed.
Why is investment missing from the deal?
Although the title CETA includes the word ‘economic’, it is missing a dedicated section on investments, which does appear in other deals that India has negotiated, such as those with the European Free Trade Association (EFTA) and New Zealand.
The deals with EFTA and New Zealand include a commitment from both parties to facilitate set amounts of investments into India. The U.K. agreement lacks this provision. One of the main reasons India and the U.K. have not been able to make headway on an investment treaty is the difference of opinion on how arbitration of disputes should be handled.
In 2017, India unilaterally cancelled nearly all the Bilateral Investment Treaties (BITs) it had entered into, with the objective of reviewing them. An important provision of these BITs was that any dispute between a foreign investor and the Indian government would be arbitrated in a third country.
The cancellation of the BITs meant that foreign investors would have to first go through the full Indian legal process for a set period of time before availing of international arbitration, a prospect that has made several foreign investors balk.The India-U.K. BITs could not be completed along with the trade pact because of differences along these lines.
Without a BIT, investors have fewer treaty-based protections and no dedicated investor-state dispute mechanism if disputes arise.
Also Read | Maturing approach: On the India-U.K. Comprehensive Economic and Trade Agreement
Why won’t U.K. drugmakers gain wider access to India?
Even though India has agreed to reduce tariffs, U.K. pharmaceutical companies will still find it difficult to gain wider access to the Indian market. During the negotiations, India held its position on Intellectual Property standards, resisting pressure to tweak its norms to enhance patent protection.
In particular, India fought to retain Section 3(d) of The Patents Act, 1970, which curbs the practice of “evergreening” by preventing pharma companies from obtaining fresh patents for minor modifications to a known drug unless they demonstrate enhanced therapeutic efficacy. Retaining this provision means that, if a modified version of the drug does not qualify for a new patent under Section 3(d), the original patent expires at the end of its term, allowing Indian pharmaceutical companies to manufacture generic versions of the drug, provided no other valid patents cover the product or its manufacture.
As a result, U.K. pharmaceutical exporters will continue to compete with Indian generic drug manufacturers in the Indian market. The data illustrates how this has played out in the past. The U.K. exports around £26 billion worth of medicines globally, but only £127 million, or 0.5%, goes to India. On the other hand, the U.K.’s National Health Service benefits significantly from access to low-cost Indian generic medicines manufactured in India.
A U.K. Minister, giving evidence to a Parliamentary committee, acknowledged the limitation directly, saying he “would have liked to have been able to see us go further” on Intellectual Property, while noting that doing so would have required significant legislative change in India.
Why does the carbon tax remain an issue?
The U.K.’s Carbon Border Adjustment Mechanism (CBAM), due to come into force from January 1, 2027, sits outside CETA entirely. It was not part of the CETA negotiations. Under CBAM, the U.K. will charge importers of carbon-intensive goods, such as steel, aluminium and cement, a fee roughly matching what a U.K. producer pays for the same emissions.
Indian steel and aluminium exporters, whose production could be more carbon-intensive than that of U.K. producers, will have to bear the impact of the CBAM charge, even though they will receive lower import duties as a result of the CETA.
The U.K.’s trade commissioner for South Asia has stated the two were kept apart from the outset: “We made it clear from day one that CBAM was never part of the FTA”. Officials of the U.K. have said the issue will be addressed separately once it takes effect. For exporters, this means the tariff benefit they gain today could be offset by a carbon cost they face from 2027.
The saving grace is that the U.K. has not yet granted any country or regional bloc an exemption from the CBAM.
What lies ahead?
Taken together, these gaps point to a common pattern: CETA opens doors on tariffs and market access, but stops short of resolving the harder questions of legal protection, investment protection, and climate policy that sit around its edges. Professionals, investors, pharma exporters and carbon-intensive exporters will each be watching how, and whether, those gaps are addressed over time.
Published – July 24, 2026 11:32 pm IST
