Friday 01 / August / 2025
New Delhi: The India-UK Free Trade Agreement marks a historic milestone in global trade and bilateral relations. By reducing tariffs, broadening market access, and strengthening cooperation across key sectors including textiles, pharmaceuticals, information technology, food processing, green energy, auto parts, footwear, furniture, jewellery, chemicals, machinery, and sports goods, the agreement aims to significantly enhance bilateral trade. It also seeks to drive job creation, boost investment flows, and provide vital support to MSMEs and startups.
The recently signed India–United Kingdom Free Trade Agreement (FTA) marks a transformative milestone in global trade diplomacy. Signed on 24 July 2025 in London by Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer, the pact was finalized after nearly three years of intense negotiations. It stands as one of the most comprehensive trade deals India has concluded with a developed economy in recent years. For the United Kingdom, this agreement represents the first major bilateral FTA with an emerging market post-Brexit, underscoring India’s strategic importance.
The agreement covers trade in goods and services, investment, intellectual property, e-commerce, rules of origin, customs facilitation, and government procurement. By sharply reducing or eliminating tariffs on a wide range of products and expanding market access, the FTA is poised to redefine economic relations between the two nations.
One of the cornerstone features of the agreement is the elimination of tariffs on goods. The United Kingdom has committed to providing duty-free access to 99 percent of Indian exports. On the other hand, India will phase out tariffs on over 90 percent of UK exports over the next decade. This reduction in tariff barriers will directly benefit Indian sectors such as textiles, leather, gems and jewellery, marine products, pharmaceuticals, and IT hardware, while UK exporters will gain improved access to India's fast-growing consumer base in sectors like high-end automobiles, Scotch whisky, processed food, and advanced machinery.
The tariff structure under the agreement adopts a phased and calibrated approach. India will immediately eliminate tariffs on 42 percent of UK goods, with further reductions applied progressively over a ten-year period. Sensitive sectors such as automobiles, dairy, and alcoholic beverages will see slower reductions, with some items receiving extended transition periods. Similarly, the UK has offered immediate zero-duty access to 99 percent of Indian goods, which include textiles, apparel, leather, and engineering products. This balanced structure allows domestic industries time to adjust while unlocking long-term gains from liberalized trade.
In the services sector, the FTA has made groundbreaking progress. India has secured preferential access for its IT, business consulting, and audiovisual sectors, while the United Kingdom has agreed to liberalize rules for the movement of Indian professionals. The deal facilitates short-term business visas, intra-corporate transfers, and post-study work visas for Indian graduates in the UK. Additionally, both sides have agreed to pursue mutual recognition of professional qualifications in fields such as accounting, architecture, and legal services.
Investment promotion and protection is another integral aspect of the agreement. The FTA incorporates an investment chapter that ensures fair treatment of investors, safeguards against expropriation, and introduces a transparent dispute resolution mechanism. The deal is expected to enhance investor confidence by reducing regulatory uncertainties and promoting long-term capital flows in sectors such as renewable energy, banking, insurance, infrastructure, and retail.
The digital economy and e-commerce also receive significant emphasis. For the first time in an Indian FTA, comprehensive provisions on digital trade have been included. These address data protection, cybersecurity cooperation, and barriers to cross-border digital transactions. The agreement also discourages unjustified data localization requirements, benefiting Indian and British IT and fintech companies by encouraging innovation and digital connectivity.
India–UK trade has shown strong momentum in recent years. The total bilateral trade between the two countries rose from USD 15.4 billion in FY 2020–21 to USD 22.7 billion in FY 2024–25. India continues to maintain a positive trade balance, with a surplus of USD 4.3 billion in the last fiscal year. The following table highlights the trade trends:
Financial Year India's Exports to UK (USD Billion) India's Imports from UK (USD Billion) Total Trade (USD Billion) Trade Balance (USD Billion)
2020–21 9.2 6.2 15.4 +3.0
2021–22 10.5 6.6 17.1 +3.9
2022–23 11.4 7.2 18.6 +4.2
2023–24 12.9 8.4 21.3 +4.5
2024–25 13.5 9.2 22.7 +4.3
The structure of trade between India and the UK is complementary and strategically important. India's primary exports include garments, textiles, gems and jewellery, engineering goods, petroleum products, transport equipment, spices, pharmaceuticals, and marine products. The FTA’s elimination of UK tariffs on 99 percent of Indian goods is expected to make these exports significantly more competitive. Indian exporters, particularly small and medium enterprises, stand to gain from reduced costs and improved access.
Labour-intensive sectors in India such as textiles, apparel, leather goods, handicrafts, and marine exports are poised to benefit the most from the FTA. These sectors employ millions of workers, particularly from rural and semi-urban areas. With tariff elimination, Indian products will become more price competitive in the UK market, driving higher export volumes and generating employment across supply chains. Enhanced demand for Indian garments and lifestyle products is expected to significantly boost production in clusters like Tirupur, Ludhiana, Surat, and Kanpur.
India’s micro, small and medium enterprises (MSMEs) and startups stand to gain enormously from the FTA. With simplified trade facilitation, reduced compliance burdens, and digital trade support, MSMEs will find it easier to access the UK market. The FTA also includes capacity-building provisions, access to public procurement, and technology transfer mechanisms which are tailored to benefit innovation-driven startups and product-based MSMEs. This will foster entrepreneurship, raise productivity, and enhance global integration of India’s smaller businesses.
In contrast, India imports machinery, precious and semi-precious stones, engineering goods, medical devices, chemicals, and high-end technology from the UK. With reduced tariffs, British exports such as alcohol, confectionery, processed foods, and specialty chemicals are likely to see strong growth. The UK’s exports of cutting-edge technology and capital goods will also support India’s efforts to modernize its manufacturing base. The agreement provides for streamlined customs procedures and mutual recognition of standards to reduce transaction costs and enhance predictability for traders.
Investment relations between India and the UK have been strong and mutually beneficial. In FY 2022–23, India received USD 1.74 billion in foreign direct investment from the UK, up from USD 1 billion in the previous fiscal. Cumulatively, UK investments in India have reached USD 34.29 billion since April 2000, placing the UK among India’s top ten investors. British companies have invested across sectors such as infrastructure, renewable energy, financial services, education, and retail.
India, on its part, has become the second-largest investor in the UK in terms of the number of investment projects. Indian firms are active in pharmaceuticals, IT, automotive manufacturing, and industrial engineering. Companies such as Tata Group, Infosys, Wipro, Sun Pharma, and Mahindra have made significant contributions to the UK economy. The FTA will deepen this investment partnership by ensuring better protection for investors, reducing compliance costs, and supporting collaborative ventures.
Strategically, the FTA strengthens the India–UK Comprehensive Strategic Partnership and enhances bilateral cooperation in areas such as climate action, digital innovation, green technologies, and skill development. It reinforces the two democracies' commitment to a rules-based global trading system at a time when protectionism is on the rise.
The FTA also serves broader geopolitical interests. For India, it affirms its position as a credible and reliable trade partner capable of negotiating complex agreements. For the UK, it provides access to one of the world’s fastest-growing markets. The deal supports India's vision of "Atmanirbhar Bharat" by facilitating access to quality inputs, technologies, and capital needed for domestic industrial growth.
To oversee smooth implementation, both sides have set up a Joint Implementation Committee. The agreement also provides for regular reviews and a formal mid-term evaluation scheduled for 2027. These mechanisms will help identify bottlenecks, resolve disputes, and ensure that the agreement continues to serve mutual interests.
In conclusion, the India–UK FTA complements India's evolving trade strategy, which now focuses more on bilateral trade arrangements rather than relying solely on multilateral platforms. This is a landmark development that promises to unlock new avenues of trade, investment, and strategic collaboration. It is expected to double bilateral trade to over USD 50 billion by 2030, create thousands of jobs, and enhance consumer welfare in both countries. By addressing tariff and non-tariff barriers, simplifying customs and regulatory processes, and expanding market access for goods and services, the FTA offers a blueprint for the future of global trade diplomacy. Furthermore, the agreement reinforces the vision of a more self-reliant, globally integrated India and a post-Brexit UK striving to diversify its economic relations trajectory
As global supply chains shift and new trade challenges emerge, this FTA positions India and the UK as resilient economic partners, ready to harness emerging opportunities. The partnership forged through this agreement is not only economic but also symbolic of deeper trust, shared values, and a joint commitment to a prosperous future.
As India continues to establish itself as a major player in global trade trajectory and the UK looks to diversify post-Brexit partnerships, this agreement stands out as a model for mutually beneficial, inclusive, and forward-looking economic cooperation.
