New Delhi: In a landmark achievement for global trade, India and the United Kingdom have successfully concluded a comprehensive Free Trade Agreement (FTA) after nearly three years of rigorous negotiations. Announced on May 6, 2025, by Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer, this historic deal is poised to transform bilateral trade, enhance economic cooperation, and create new opportunities for businesses, workers, and consumers in both nations. With a current bilateral trade value of approximately USD 60 billion, the agreement is expected to double this figure by 2030, marking a significant milestone in the India-UK Comprehensive Strategic Partnership.
A Comprehensive and Mutually Beneficial Deal
The India-UK FTA is a robust agreement that covers trade in goods, services, investment, and professional mobility, addressing both tariff and non-tariff barriers. Described as a “mutually beneficial” deal, it ensures equitable benefits for both economies while promoting innovation, job creation, and sustainable growth. The agreement was finalized following high-level discussions, including a pivotal meeting between Prime Ministers Modi and Starmer on the sidelines of the G20 Summit in Rio de Janeiro in November 2024, with negotiations resuming in February 2025 and concluding in April 2025 in London.
“This Agreement sets a new benchmark for equitable and ambitious trade between two large economies,” said India’s Commerce and Industry Minister Piyush Goyal. “It will benefit Indian farmers, fishermen, workers, MSMEs, start-ups, and innovators.” UK Business and Trade Secretary Jonathan Reynolds hailed it as “the largest ever trade deal secured by the UK,” emphasizing its significance as the most ambitious FTA India has ever undertaken and the biggest the UK has concluded since leaving the EU.
Key Highlights of the India-UK FTA
Tariff Elimination and Market Access
One of the cornerstone achievements of the FTA is the elimination of tariffs on 99% of tariff lines, covering nearly 100% of the trade value for Indian exports to the UK. This ensures duty-free access for Indian goods, significantly boosting sectors such as textiles, marine products, leather, footwear, sports goods, toys, gems and jewellery, engineering goods, auto parts, engines, and organic chemicals. The Indian government expects these labour-intensive sectors to gain a competitive edge in the UK market, particularly textiles, which currently face tariffs of up to 10%. The deal levels the playing field with competitors like Bangladesh, fostering export growth and job creation.
On the UK side, India has agreed to slash tariffs on 90% of tariff lines, with 85% becoming fully tariff-free within a decade. Notable reductions include halving tariffs on whisky and gin from 150% to 75%, with a further reduction to 40% by year ten. Automotive tariffs will drop from over 100% to 10% under a quota, making UK cars and auto parts more affordable in India. Other UK goods benefiting from reduced tariffs include cosmetics, aerospace products, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate, and biscuits. These reductions are expected to lower prices for Indian consumers and enhance market access for UK businesses.
Double Contribution Convention
A significant provision of the FTA is the Double Contribution Convention, which exempts Indian workers temporarily employed in the UK and their employers from paying social security contributions for three years. This long standing demand from India addresses a key concern for Indian professionals and businesses, enhancing the cost-competitiveness of Indian talent in the UK. Industry body Nasscom praised the provision, stating, “This will not only enhance the access of Indian talent in the UK but also create new opportunities for skilled professionals, enabling them to contribute meaningfully to the UK’s dynamic economy.”
Professional Mobility and Services
The FTA facilitates the mobility of professionals, including investors, intra-corporate transferees (along with their partners and dependent children with work rights), and independent professionals. This provision is expected to strengthen India’s services sector, particularly IT and IT-enabled services (ITeS), financial services, and digitally delivered services. Indian professionals will gain access to the UK’s advanced digital infrastructure, creating new job opportunities and fostering innovation. The agreement also promotes good regulatory practices and addresses non-tariff barriers, further easing service trade.
Export Opportunities and Consumer Benefits
The FTA opens significant export opportunities for Indian labour-intensive sectors. For instance, the elimination of UK tariffs on footwear, textiles, automobile components, electrical machinery, minerals, and base metals (previously ranging from 2-18%) will boost competitiveness. Indian consumers will benefit from cheaper imports of UK goods, including cosmetics, lamb, salmon, soft drinks, chocolate, and biscuits. Similarly, British shoppers will enjoy lower prices on Indian clothes, footwear, and food products like frozen prawns, enhancing affordability and choice.
Protection for Sensitive Sectors
To safeguard domestic interests, India has excluded sensitive agricultural products such as dairy, apples, and cheese from duty concessions. This ensures that Indian farmers are protected from potential market disruptions while still benefiting from expanded export opportunities in other sectors.
Economic and Strategic Implications
The India-UK FTA comes at a critical juncture amid global trade uncertainties, including fears of fresh tariffs under the incoming US administration and a renewed push for deal-making. As India negotiates FTAs with the US, the European Union, Chile, and Peru, the UK agreement sets a precedent for ambitious and equitable trade partnerships. The deal is expected to significantly enhance bilateral trade, generate new employment avenues, raise living standards, and improve the overall well-being of citizens in both countries.
The agreement also includes provisions to address the UK’s Carbon Border Adjustment Mechanism (CBAM), which has raised concerns for Indian metal exports. India proposed a ‘rebalancing mechanism’ to compensate for losses incurred due to CBAM, reflecting its proactive stance in safeguarding export interests. Additionally, both nations are working to finalize a Bilateral Investment Treaty (BIT) alongside the FTA, further deepening economic ties.
Industry Reactions
The Indian textile and footwear industries have welcomed the duty elimination, anticipating a surge in exports and job creation. However, the alcohol beverage industry expressed concerns, noting that the government has not fully addressed their pleas. They fear that similar agreements with the US and EU could adversely impact the Indian alcohol sector. Despite these concerns, the overall sentiment is optimistic, with stakeholders recognizing the FTA’s potential to catalyze growth and innovation.
A Historic Milestone in Bilateral Relations
Prime Minister Modi described the FTA as a “historic milestone” that will “further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation for both our economies.” UK Prime Minister Starmer echoed this sentiment, calling it a “landmark trade deal” that delivers on the UK’s Plan for Change. The leaders’ statements underscore the deal’s role in strengthening economic and commercial ties, fostering mutual prosperity, and setting a new standard for global trade agreements.
Challenges and Negotiations
The road to the FTA was not without challenges. Negotiations, which began in January 2022, faced pauses and sticking points, particularly around rules of origin and short-term service visas. However, the commitment of both governments, coupled with high-level engagements, including visits by India’s Finance and Commerce Ministers to the UK in April 2025, ensured the deal’s successful conclusion. The FTA’s comprehensive scope, covering goods, services, investment, and professional mobility, reflects the pragmatic and purposeful approach adopted by both nations.
Looking Ahead
As the India-UK FTA comes into effect, it is expected to reshape bilateral trade dynamics, boost economic growth, and create a more integrated and competitive market. The agreement not only strengthens the India-UK partnership but also positions both nations as leaders in equitable and ambitious trade practices. With the potential to double bilateral trade by 2030, the FTA is a testament to the power of collaboration and mutual benefit in an increasingly interconnected global economy.
FAQs
1.What is the India-UK Free Trade Agreement (FTA)?
The India-UK FTA is a comprehensive trade agreement signed on May 6, 2025, between India and the United Kingdom to reduce or eliminate trade barriers, enhance bilateral trade, and promote economic cooperation. It covers trade in goods, services, investment, and professional mobility, aiming to double the current USD 60 billion bilateral trade by 2030.
2.What are the key benefits of the FTA for India?
The FTA provides duty-free access for 99% of Indian exports to the UK, boosting sectors like textiles, marine products, leather, footwear, engineering goods, and organic chemicals. It also facilitates professional mobility, exempts Indian workers in the UK from social security contributions for three years, and creates new opportunities in IT, financial services, and digitally delivered services.
3.How does the FTA benefit the UK?
The UK gains from reduced tariffs on 90% of its exports to India, with 85% becoming tariff-free within a decade. Key products like whisky, gin, auto parts, cosmetics, lamb, and medical devices will see significant tariff cuts, making them more competitive in India. British consumers will benefit from cheaper Indian clothes, footwear, and food products like frozen prawns.
4.What is the Double Contribution Convention in the FTA?
The Double Contribution Convention is a provision that exempts Indian workers temporarily employed in the UK and their employers from paying social security contributions for three years. This enhances the cost-competitiveness of Indian professionals and supports their mobility to the UK.
5.How will the FTA impact bilateral trade and sensitive sectors?
The FTA is expected to double bilateral trade from USD 60 billion to USD 120 billion by 2030 by eliminating tariffs and addressing non-tariff barriers. To protect sensitive sectors, India has excluded products like dairy, apples, and cheese from duty concessions, ensuring the interests of its farmers are safeguarded.
