Modi Highlights India–UK Breakthrough in Trade and Social Security Agreements

Image - Prime Minister's Office

India and the United Kingdom have signed the landmark Comprehensive Economic and Trade Agreement (CETA) along with a Social Security pact, hailed by Prime Minister Narendra Modi as a milestone that will deepen economic linkages, boost exports, and support Indian professionals in the UK.

PM Modi said that the CETA would provide fresh momentum to India's farmers, entrepreneurs and MSMEs by expanding access to the UK market across several vibrant sectors. He added that the agreement on Social Security would provide invaluable support to Indian professionals working temporarily in the United Kingdom and enhance the competitiveness of Indian enterprises.

Background

• Signed: July 24, 2025, in the presence of PM Narendra Modi and UK PM Sir Keir Starmer.
• Negotiations concluded: May 6, 2025.
• Signatories: Commerce Minister Piyush Goyal and UK Secretary of State for Business and Trade Jonathan Reynolds.
• Bilateral trade: USD 56 billion, with a target to double by 2030.

Key Features of CETA

• Tariff Elimination: 99% of India’s exports to the UK will enjoy zero-duty access, covering nearly the entire trade basket.
• Benefiting sectors: Textiles, leather, footwear, gems & jewellery, marine products, toys.
• Tariff reduction: Processed foods, textiles, and leather tariffs cut from up to 70% to zero.
• Services Commitments: IT/ITeS, finance, legal, education, telecom, architecture, engineering.
• Professional Mobility: Streamlined pathways for contractual service suppliers, business visitors, intra-corporate transferees, and independent professionals.
• UK quotas: 1,800 Indian chefs, yoga instructors, and artists annually.

Social Security Agreement

• Exemption: Indian workers and employers exempt from UK social security contributions for up to three years.
• Savings: Over ₹4,000 crore, improving take-home pay and competitiveness.

Strategic Impact

• For India: Boosts farmers, MSMEs, artisans, women-led enterprises; expands access to UK markets.
• For the UK: Gains access to India’s fast-growing market; strengthens cooperation in technology and innovation.
• For Both Nations: Reflects trust between democracies; builds a forward-looking partnership driven by trade, technology, investment, and innovation.

Leadership Statements

• PM Narendra Modi: “This is a significant moment in the India–UK partnership. These agreements translate our shared ambition into tangible opportunities for our people.”
• Commerce Minister Piyush Goyal: “This FTA unlocks tariff-free access on 99% of Indian exports to the UK, advancing the ‘Make in India’ initiative and setting the stage for bilateral trade to double by 2030.”

Conclusion

The India–UK CETA and Social Security Agreement mark a transformative step in bilateral relations, opening unprecedented trade opportunities, easing professional mobility, and reinforcing shared prosperity goals.

Japan’s Semiconductor Gas Shuts Down, China Holds the Keys

Japan’s semiconductor gas production has collapsed to zero after China halted exports of high-purity tungsten powder, cutting off supplies of tungsten hexafluoride — a critical material for advanced chipmaking. This leaves TSMC, SK Hynix, and Samsung highly exposed, with Japanese suppliers Kanto Denka and Central Glass announcing permanent shutdowns from July 1, 2026.

Tungsten-based gases in the semiconductor industry are special chemical gases made from tungsten that help build the tiny wiring inside advanced computer chips. For a common man, think of them as the “glue” or “filler” that connects microscopic parts of a chip together so your phone, laptop, or AI server can run faster and more reliably.

In short, tungsten-based gases are invisible but vital building blocks of modern electronics. Without them, chips can’t be made at the cutting-edge scale we rely on today.

What Happened

• China’s Export Ban: Beijing tightened export rules on high-purity tungsten powder, halting shipments to Japan.
• Immediate Impact: Japanese producers Kanto Denka and Central Glass cannot source raw tungsten, forcing them to cease tungsten hexafluoride production.
• Production Collapse: Japan’s output of this gas has dropped to zero.

Why Tungsten Hexafluoride Matters

• Essential Role: Used to fill nano-scale vias in advanced chips (7nm and below).
• Applications: 3D NAND, HBM, and advanced logic chips requiring precise interconnects.
• Cost Structure: 60–70% of production cost comes from tungsten powder.

Global Impact

• TSMC, Samsung, SK Hynix: All rely on Japanese suppliers for tungsten hexafluoride.
• Supply Chain Shock: With Japan out, China becomes the only large-scale producer, gaining pricing power.
• Price Surge: Chinese manufacturers’ stock prices are already rising, signaling higher costs for offshore buyers.
• Alternative Materials: Samsung has begun using molybdenum in SSD NAND; SK Hynix plans to adopt molybdenum for its 375-layer NAND.

Strategic & Economic Risks

Factor	Impact
Japan’s collapse	No domestic tungsten hexafluoride production
China’s leverage	Sole supplier, controls pricing
Memory makers	NAND & HBM supply chains disrupted
Chip costs	Rising due to scarcity
Alternatives	Molybdenum adoption underway but not yet scalable

Risks & Challenges

• Supply Chain Fragility: Overdependence on China for critical raw materials.
• Cost Inflation: Higher semiconductor prices could ripple into smartphones, AI servers, and consumer electronics.
• Transition Risks: Switching to molybdenum may cause delays in production ramp-up.
• Geopolitical Exposure: Japan’s semiconductor ecosystem weakened, while China consolidates control.

What’s Next

• Short-term shortages: Expected in NAND and HBM memory.
• China’s dominance: Will likely push global buyers to diversify supply chains.
• Material innovation: Molybdenum and cobalt adoption may accelerate to reduce reliance on tungsten.

India's Position

India is not directly hit by Japan’s collapse since it wasn’t a tungsten gas producer. However, as India builds fabs and packaging units, import costs will rise, making local material innovation critical. ISM 2.0’s emphasis on domestic material production could help India reduce dependence on China in the medium term.

India is positioning itself as a semiconductor hub but remains vulnerable in the tungsten supply chain. While Japan’s collapse in tungsten hexafluoride production exposes global chipmakers, India is not yet a producer of this critical gas. Instead, India is focusing on building fabs, packaging units, and alternative material ecosystems under the ₹76,000 crore India Semiconductor Mission.

India–NZ Free Trade Agreement Delivers Zero‑Duty Access, Cultural Exchange, and $20B Investment

India and New Zealand have signed a landmark Free Trade Agreement (FTA) that, for the first time, includes dedicated access for Health and Traditional Medicine Services, spotlighting India’s AYUSH systems alongside Maori health practices. The deal eliminates tariffs, secures USD 20 billion in investment, and opens new pathways in organics, creative industries, and bilateral trade.

Health & Traditional Medicine Services

• First-of-its-kind provision: New Zealand has included a dedicated chapter on Health and Traditional Medicine Services.
• AYUSH recognition: Ayurveda, Yoga & Naturopathy, Unani, Siddha, Sowa-Rigpa, and Homeopathy gain global visibility.
• Collaboration: Promotes medical value travel, wellness services, and integration with Maori health practices.
• Cultural dimension: Strengthens preservation of traditional knowledge systems and people-centred growth.

Organics Trade – Mutual Recognition Arrangement (MRA)

• MRA with Australia’s standards enables smoother certification and acceptance of organic products.
• India’s organic exports to NZ (FY 2024–25): 2,401.53 MT valued at USD 3.18 million.
• Key products: Basmati rice, flax seeds, Arabica Cherry AB, psyllium husk, soyabean oil cake, organic black tea.
• Expected impact: Greater traction and market access post-MRA.

Bilateral Trade Momentum

• Total trade (2024): USD 2.4 billion.
• Merchandise trade (FY 2024–25): USD 1.3 billion, up 49% year-on-year.
• FTA impact: Eliminates tariffs, enhances services access, secures USD 20 billion investment, and strengthens institutional frameworks.
• Employment & exports: Expected to expand opportunities across sectors and deepen resilience.

Sectoral Gains

• Zero-duty access boosts textiles, clothing, agriculture, processed foods, leather, footwear, engineering, automotive, electronics, chemicals, plastics, and rubber.
• State-level benefits:
• Gujarat: Chemicals, gems.
• Maharashtra: Pharma, auto components.
• Tamil Nadu: Textiles, leather, auto.
• Uttar Pradesh: Leather, carpets, handicrafts.
• Punjab: Agri products.
• Karnataka: Pharma, electronics.
• West Bengal: Tea, engineering goods.
• Andhra Pradesh & Kerala: Marine exports.
• North-East: Tea, spices, bamboo, organic produce.

Leadership Statements

• PM Narendra Modi: Welcomed the FTA, calling it a milestone that will benefit farmers, youth, MSMEs, artisans, startups, and innovators.
• Commerce Minister Piyush Goyal: Highlighted the speed of conclusion (nine months) as a reflection of trust and ambition.
• NZ PM Christopher Luxon: Stated the deal diversifies exports, supports doubling export value in 10 years, and levels the playing field for NZ exporters.

Strategic Significance

• Gateway to Oceania: Positions India as a key supplier of skilled workforce and traditional medicine services.
• People-to-people ties: With nearly 300,000 persons of Indian origin in New Zealand, the agreement strengthens cultural and economic bonds.

This FTA is not just about trade—it is a comprehensive partnership spanning health, culture, organics, and industry, reinforcing India’s role as a global hub for wellness and diversified exports.

War in Iran Puts India’s $11 Bn Phone Trade at Risk

India’s mobile phone exports, worth $11 billion in the first half of FY26, could face a loss of $2–3 billion due to the ongoing Iran war. The disruption of Gulf trade routes, rising freight costs, and reduced consumption in West Asia are the main drivers of this projected hit.

Key Impact on India’s Mobile Exports

• Projected Loss: $2–3 billion in FY26.
• Sector Size: Mobile exports generated $11 billion in the first six months of FY26.
• Primary Cause: Disruption of shipping routes through the Strait of Hormuz, a critical global oil and trade corridor.
• Affected Region: Gulf countries, a major hub for electronics manufacturing services (EMS) companies that re-export Indian mobile phones.
• Top Commodity at Risk: Mobile phones are among the top five most-impacted export categories.

Why the Gulf Matters

• The Gulf region is both a consumption hub and a transit hub for Indian electronics.
• EMS companies rely on Gulf ports for distribution into West Asia, Africa, and Europe.
• With war-driven instability, insurance premiums, freight costs, and delivery timelines have all surged.

Comparative Snapshot

Factor	Pre-War (FY26 H1)	Current Impact (Post-War)
Mobile Export Revenue	$11 billion	Risk of $2–3 billion loss
Freight Costs	Stable	Rising sharply
Gulf Trade Routes	Reliable	Disrupted (Strait of Hormuz)
Insurance Premiums	Moderate	Increased significantly
Consumption Demand	Strong	Weakening in Gulf markets

⚠️ Risks & Trade-Offs

• Supply Chain Delays: Longer shipping times due to rerouting around conflict zones.
• Higher Costs: Freight and insurance hikes squeeze margins for exporters.
• Demand Shock: Gulf consumers may cut back on electronics purchases amid regional instability.
• Strategic Vulnerability: Heavy reliance on Gulf markets exposes India’s mobile sector to geopolitical risks.

Possible Mitigation Strategies

• Diversify Export Markets: Strengthen trade with Africa, Southeast Asia, and Latin America to reduce Gulf dependency.
• Local Warehousing: Establish storage hubs outside conflict zones to ensure smoother distribution.
• Policy Support: Government may need to extend export incentives or subsidies to cushion losses.
• Supply Chain Resilience: Explore alternate shipping routes via Europe or East Africa.

Bottom Line

The Iran war is not just a geopolitical crisis—it’s a trade shock for India’s mobile export sector, threatening up to $3 billion in losses. For Gurugram-based exporters and EMS firms, this underscores the urgency of market diversification and supply chain resilience to safeguard India’s fast-growing electronics industry.

India’s $58 Billion Trade Surplus Sparks US Probe

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The United States has formally launched a Section 301 trade probe into India, citing a record $58 billion trade surplus and alleged “structural excess capacity” in key industries such as steel, petrochemicals, textiles, autos, and solar modules. This investigation could lead to new tariffs and complicates ongoing India–US trade negotiations.

Key Details

• Probe Basis: Section 301 of the US Trade Act, often used to investigate unfair trade practices.
• Targeted Countries: India plus 15 other major US trading partners, including China.
• Reason: US claims India’s industrial overproduction displaces American manufacturing and discourages domestic investment.
• Trade Surplus Highlighted: India recorded a $58 billion surplus with the US in 2025, making it a prime target.
• Recent Context: In February 2026, Washington and New Delhi agreed to reduce US tariffs on Indian goods from 50% to 18%, but this probe now threatens that progress.

Impact on India–US Trade Relations

Factor	Current Status	Potential Impact
Tariffs	Reduced to 18% in Feb 2026	Could rise again if probe finds unfair practices
Bilateral Trade Agreement (BTA)	Ongoing negotiations	May stall due to tariff uncertainty
Industries at Risk	Steel, petrochemicals, solar modules, textiles, autos	Higher tariffs, reduced exports
US Domestic Politics	Driven by Trump’s “America First” agenda	Increased protectionism, pressure on India

Risks & Challenges

• Tariff Escalation: If the US imposes new duties, Indian exporters in steel, petrochemicals, and solar could face sharp declines in competitiveness.
• Diplomatic Strain: The probe may slow or derail bilateral trade agreement talks, undermining recent progress.
• Global Supply Chains: India’s role in supplying affordable solar modules and steel could be disrupted, affecting global markets.
• Legal Uncertainty: The US Supreme Court recently invalidated reciprocal tariffs, giving the administration more leeway to impose unilateral measures.

Strategic Outlook

• India’s Position: Likely to argue that its production capacity supports global demand and is not aimed at undermining US industry.
• US Strategy: Using Section 301 probes as leverage to secure concessions in trade negotiations.
• Global Implications: Other countries targeted (like China) may coordinate responses, potentially escalating trade tensions worldwide.