AI, software exporters gain as UK-India FTA introduces first-ever source code protection

PM Narendra Modi signed the trade deal with UK PM Keir Starmer on July 24.

In a first for Indian trade policy, the recently concluded UK-India Free Trade Agreement includes a commitment to restrict the forced transfer of source code and embedded algorithms, which means intellectual property (IP) protection for exporters of artificial intelligence (AI), software, and digital services.

The development is being viewed as a major boost for Indian tech, information technology (IT), and ITeS exporters, particularly firms developing AI models, enterprise software, and SaaS platforms that rely on proprietary code.

“This represents the first time India has agreed to such a commitment,” said Ashita Jain of ORF America in a published note, calling it “a notable policy shift” that could serve as a benchmark in India’s ongoing negotiations with other developed economies.

The provision, part of the digital trade chapter released by India’s Ministry of Commerce, marks a shift in India’s approach to digital trade negotiations. Until now, India had omitted such clauses in trade talks, citing regulatory flexibility and domestic policy priorities.

As AI leads to rapid change in business models and is most likely to shrink the traditional pyramid model, India’s top IT firms are leaning towards IP-led growth.

For example, India’s second-largest IT company, Infosys, echoed the importance of IP-led businesses in the financial sector. “Some of our programs, for example, what we're doing in our insurance platform, what we're doing in our financial services, banking platform in physical, those are areas where we see more and more IP,” CEO Salil Parekh said while addressing a press conference on July 23.

Also, read: India’s top IT firms lean towards IP-led growth as Gen AI shrinks the pyramid

Emerging Technologies

While the term “AI” does not feature in the UK government’s public summary, the digital trade chapter uploaded by India’s Commerce Ministry defines artificial intelligence, including machine learning, as an “emerging technology” alongside quantum, blockchain, and immersive tech.

Under Article 12.17 (Cooperation on Emerging Technologies), the pact mentions a structured approach to developing policy frameworks for the “trusted, safe, and responsible use” of such technologies.

This includes cooperation on the ethical use, algorithmic transparency, standards, and mitigation of unintended biases, all of which are important in the global AI regulation context.

Startups, GCCs

The move is expected to benefit not only large IT services firms but also the growing base of Indian AI startups and about 1,700-odd Global Capability Centres (GCCs) that develop and deploy machine learning systems for international markets.

For UK buyers of Indian tech services, the agreement adds an added layer of trust around IP protection and software reliability.

India’s commitment to the FTA brings it closer to global digital trade standards, followed by partners like Japan, the UK, and the US, who have asked for non-discriminatory access to digital markets along with strong source code protections.