India-UK FTA sends the world a clear signal on possibilities

UK and India have been negotiating an FTA since January 2022.

The recently concluded India-UK Free Trade Agreement (FTA) is a major win for India’s commercial diplomacy. Amid rising global trade protectionism—exacerbated by a broader US retreat from free trade and imposition of Trump’s tariffs—this landmark trade deal secures a stable, long-term access to the UK market for Indian exporters, boosting jobs and manufacturing.

For India, the deal does more than just open doors to the British consumer market and strengthen bilateral trade. It also establishes clear precedents and boundaries for what other major trading partners like the European Union and the United States — which are currently negotiating their own trade pacts with India — can realistically expect to extract in future trade deals

What India Gets: Improved Market Access for Indian Exports

India has secured duty-free market access through tariff elimination on 99% of tariff lines, granting preferential entry to a high-income UK consumer market for its exports, including textiles, marine products (notably frozen shrimp), leather, footwear, sports goods, toys, gems and jewellery, engineering goods, organic chemicals, and auto components. This milestone is crucial at a time when India’s merchandise export growth is stagnant, rising by only 0.08% year-on-year in FY 2024–25, and needs support on an urgent basis.

The India-UK FTA delivers substantial gains for India’s services sector. The UK, a global hub for finance, IT, and professional services—fields where Indian talent already excels—offers new opportunities through ambitious commitments on “digitally delivered services” and streamlined “mobility for professionals”. These measures will make it easier and more cost-effective for Indian service providers to operate in the UK. Additionally, a three-year exemption from double social security contributions will save Indian companies and workers millions, further boosting the competitiveness of Indian service providers.

Unlike the US dollar, against which the INR has strengthened in the last couple of weeks, the rupee has been weakening against the GBP since Sept 2022 - INR 88 on Sept 24, 2022 to INR 113 on May 7, 2025. Along with post-FTA tariff cuts, this favourable currency dynamic will give an immediate boost to all kinds of Indian exports to the UK, by improving their price competitiveness.

What India Offers: A Staggered Tariff Reduction Commitment

Free Trade Agreements (FTAs) involve mutual concessions. Accordingly, India will reduce import tariffs on 90% of tariff lines, with 85% becoming fully tariff-free within a decade. Import duties on whisky and gin will be halved from 150% to 75%, and further reduced to 40% by the end of the tenth year. Automotive tariffs will drop from over 100% to 10% under a Tariff Rate Quota (TRQ) regime. Consequently, British whisky, gin, and cars will enter Indian markets at more competitive prices.

Other British products that will see reduced import tariffs and become cheaper for Indian consumers include cosmetics, medical devices, electrical machinery, salmon, soft drinks, biscuits and chocolates.

What does the FTA mean for Indian businesses?

Indian exporters from labour-intensive sectors such as textiles, toys, and marine products, along with relatively more knowledge-intensive products such as auto components and pharmaceuticals, will see their merchandise become more price competitive in the high-margin British market.The agreement also addresses non-tariff barriers and streamlines customs procedures, making it easier for Indian merchandise to reach UK consumers and vice versa. And by easing mobility for skilled professionals, it opens doors for Indian talent to lead in global value chains.

However, it also means increased competition for import-competing domestic manufacturers of alcoholic beverages, and cars, among others.

While some may view freer imports of “Made in UK” cars into India as a threat for domestic automakers, Indian consumers will benefit from greater choice and lower prices, and the domestic industry will be encouraged to innovate and upgrade—a long-overdue necessity. Moreover, this also secures duty-free market access for India’s exports of auto parts and components to the UK market. Similarly, Indian producers of alcoholic beverages will need to “up” their game in terms of pricing, quality and varieties, in order to meet up the challenges posed by competitively priced imports.

As of now, not all details of the negotiated agreement are publicly available, but it’s reasonable to assume that India will need to strengthen its IPR rules and their enforcement on the ground. Enhanced investor protections are likely to impose some constraints on domestic policymaking.

The way forward

As India aims to double its trade with the UK to US$120 billion by 2030 from the current US$60 billion (approx.), this agreement sets a benchmark for modern, ambitious trade deals. It signals India’s readiness to engage globally, showcasing its manufacturing prowess and services expertise.

A trade deal expands sales opportunities but also presents challenges arising out of freer imports, requiring domestic businesses to adjust and adapt. India’s phased tariff reductions provide competing businesses, likely facing increased entry of “Made in UK” merchandise, sufficient time to adjust. Meanwhile, it immediately enhances market access for Indian exports in the UK—a cause for optimism.

Moreover, with the India-UK FTA finalised, there is renewed hope for the long-pending India-EU BTIA, especially critical when access to the US, India’s largest export market, remains uncertain.