India–UK Free Trade Agreement (FTA), Key Issues and Significance

The India–UK Free Trade Agreement (FTA) aims to boost bilateral trade by reducing tariffs, enhancing market access, and strengthening economic ties between India and the United Kingdom.

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Context: India–UK FTA (CETA), lauded by the Union Commerce and Industry Minister, Piyush Goyal, as the ‘gold standard’, has sparked concern for overlooking digital sovereignty.

The United Kingdom-India Free Trade Agreement could be a catalyst for deeper engagement in the GCCs.

Key Issues in the Comprehensive Economic and Trade Agreement (CETA)

Source Code Disclosure Concession: India, in the FTA, agreed to forgo its sovereign right to demand ex ante access to source codes of foreign digital goods or services, even those that may impact critical sectors.
- Under the agreement, source code can only be demanded ex post for investigation purposes, which is far weaker than the proactive regulatory right India had insisted upon at the WTO.
- In contrast, the US itself withdrew similar clauses from its trade treaties last year, acknowledging domestic security and regulatory needs.
Open Government Data Access:
- India agreed to grant equal and non-discriminatory access to U.K. parties for Open Government Data, which traditionally referred to public statistical transparency.
- In the present context, however, data is a strategic resource, crucial for AI innovation and national competitiveness.
- Allowing open access to foreign entities undermines India’s ability to develop sovereign AI solutions and exposes the nation to security risks.
Free Flow of Data and Data Localisation: While India broadly retained its data localisation stance, it committed to future consultations with the UK if it grants similar concessions elsewhere, creating vulnerabilities.
- Such clauses weaken India’s negotiating power in the future and could dilute the nation’s data sovereignty ambitions.

Broader Concerns

Digital trade agreements effectively shape the global rules for the emerging digital ecosystem. Unlike goods trade, digital rules are hard to roll back once agreed, and tend to cement a global architecture dominated by Big Tech.
India risks becoming a digital colony — dependent on external systems, with limited regulatory control over its own data and digital infrastructure.
There is no clear or coordinated digital industrialisation policy to guide trade negotiators, leaving India reacting to demands rather than shaping the agenda.
The lack of a strong political constituency for “digital sovereignty” within India means negotiators have limited pressure to safeguard these interests, unlike in agriculture or textiles where pressure groups are vocal.

Significance of the India-UK Free Trade Agreement (FTA)

Strengthening Bilateral Ties: The FTA is poised to redefine India-UK economic relations, moving beyond traditional trade to focus on services, innovation, and talent exchange.
Post-Brexit Opportunity for the UK: The FTA offers the UK access to one of the world’s fastest-growing digital and services economies—India—helping reinforce its global role in services and tech.
Economic Boost for India: For India, the FTA promises increased UK investment, alignment with digital skilling goals, and expansion of high-value service exports.
Enabling Framework: By addressing double taxation, data localisation issues, and regulatory mismatches, the FTA can remove key barriers faced by businesses.

What are Global Capability Centres (GCCs)?

Global Capability Centres (GCCs) is a strategic outpost/branch set up by multinational corporations (MNCs) to perform specialised functions for their parent organisation.
In India, GCCs have evolved into Innovation Hubs and Centers of Excellence (CoEs).
Top Destinations for setting up GCCs in India: Bengaluru, Gurugram, Hyderabad, Mumbai, Delhi-NCR, and GIFT City

Functions of GCC

Driving Innovation: Create new products or services, and conduct research.
Managing Technology: Handling IT systems, software development, cybersecurity, and other tech needs.
Handling Back-Office Tasks: They take care of finance, human resources, procurement, and customer support.
Ensuring Compliance: They make sure the company meets legal requirements and manages risks in global operations.

FTA a Catalyst for Global Capability Centres (GCCs)

India hosts over 1,500 GCCs, employing 1.9+ million professionals. These centres serve as innovation hubs for global corporations in R&D, cybersecurity, analytics, etc.
British firms increasingly see India not as a cost-cutting hub but as a co-innovation partner for high-end digital solutions.
The agreement can facilitate smoother movement of professionals and harmonised digital/data governance, key to scaling GCCs serving UK-based firms.
With proper policy backing, Indian GCCs can climb higher up the global value chain and attract more British collaborations.

Government Push for GCCs

Central Government Initiatives:
- National GCC Framework (Budget 2025): Under MeitY, in collaboration with NASSCOM, KPMG, Zinnov, and Invest India, a framework is being created to guide states on talent, infrastructure, and legal facilitation.
- No National Policy Yet: Despite rapid organic growth, there is no single national policy, prompting debate on whether one is needed.
State-Level Momentum:
- Uttar Pradesh Example: Hosted its first GCC Conclave (with TCS, Microsoft, HCL, etc.), showcasing tier-2 cities (Lucknow, Varanasi) as new GCC destinations.

Likely Impact of the FTA and GCC Growth

Boost to Innovation & Employment: More GCCs mean high-skill job creation and R&D growth, aligning with India’s digital transformation goals.
Cross-Border Talent Mobility: Easier professional movement between the UK and India could enhance talent exchange and diversity in both markets.
Knowledge Corridor: GCCs can help build a robust India-UK knowledge economy corridor, driving global competitiveness.
Investor Confidence: A well-designed FTA addressing real-world business frictions (e.g., taxation, data issues) can send strong positive signals to investors.

Way Forward

Formulate a Comprehensive Digital Sovereignty Strategy: India should urgently develop a clear, actionable policy on digital sovereignty and “digital industrialisation,” with clear red lines for trade talks.
Empower Trade Negotiators with Expertise: Include domain experts on digital sovereignty and cybersecurity in negotiating teams, backed by high-level political will.
Protect National Data as a Strategic Resource: Classify key categories of national data as sovereign assets, to be shielded from free or non-discriminatory global access.
Benchmark Best Practices: Draw lessons from how countries like the US, after initially pushing free flow of data, have revised their stance in recognition of security concerns.
Institutional Coordination: Create a cross-ministry mechanism linking MEITY, the Ministry of Commerce, and the National Security Council to vet all future digital trade provisions.