India and UK sign free trade agreement tomorrow: What’s in the deal and who benefits most

UK's Prime Minister Keir Starmer (L) and India's Prime Minister Narendra Modi talk during a bilateral meeting in the sidelines of the G20 summit at the Museum of Modern Art in Rio de Janeiro, Brazil Brazil, on November 18, 2024. (Photo by Stefan Rousseau / POOL / AFP)

India and the United Kingdom are all set to ink on Thursday a landmark Free Trade Agreement (FTA), a move expected to unlock billions in trade and investment opportunities for both nations.

The signing comes as Prime Minister Narendra Modi visits the UK, marking his fourth trip there since taking office in 2014. PM Modi is expected to meet his British counterpart Keir Starmer for wide-ranging discussions before heading to the Maldives on July 25.

This long-awaited trade pact, years in the making, marks a major turning point in India-UK economic ties, and for both countries, the gains could be significant.

What is India-UK FTA?

The India-UK Free Trade Agreement (FTA) is a major trade deal that was years in the making. Negotiations began in January 2022 under then-UK Prime Minister Boris Johnson, who had aimed to finish the talks by Diwali that year. However, after multiple delays, the deal was finally concluded in May 2025, with Prime Minister Modi calling it a “historic deal.”

This is India’s first major FTA in over ten years and marks the UK’s fourth such agreement since Brexit. The deal covers 26 chapters, including trade in goods and services, investment, and intellectual property rights. In parallel, both countries are also negotiating a separate Bilateral Investment Treaty (BIT). The FTA is still awaiting approval from the British Parliament and is expected to come into effect within the next year.

How India benefits from India-UK FTA

The new Free Trade Agreement (FTA) between India and the UK is set to give a major boost to Indian exports. Nearly 99% of Indian goods sent to the UK will now enjoy zero-duty access. This will eliminate existing tariffs that range from 4% to 16%, especially benefiting sectors like textiles, leather, footwear, toys, marine products, gems and jewellery, and engineering goods, including auto components and electric vehicles.

Another big relief comes in the form of a social security agreement. Indian workers in the UK will no longer have to contribute to UK social security for a period of up to three years. This move is expected to save Indian workers and companies around Rs 4,000 crore every year.

The agreement also opens doors for Indian professionals. Chefs, yoga instructors, musicians, and other contractual workers will now get temporary access to the UK job market, giving a boost to India's services sector.

Investment from the UK is likely to rise as well. The UK is already India’s 6th-largest foreign investor, with $36 billion invested so far. With the FTA in place, fresh investments are expected in sectors like manufacturing, automobiles, and electric mobility.

Several key Indian companies stand to gain significantly from the deal. These include Welspun India, Arvind Ltd, Relaxo, Tata Motors, Mahindra Electric, and Bharat Forge, among others. Reduced trade barriers will help these companies expand their presence in the UK market more easily.

How UK gains from FTA

The Free Trade Agreement brings significant advantages for the UK, especially through reduced tariffs on its key exports. Tariffs on 90% of UK goods will be removed, giving a strong boost to sectors like whisky, gin, automobiles, and food items. For example, the current 150% tariffs on Scotch whisky and gin will gradually drop to 75%, and then to 40% over ten years. Similarly, car tariffs will fall from 100% to just 10%. Products like cosmetics, chocolates, biscuits, salmon, and medical devices will also get tariff relief, making them more competitive in the Indian market.

UK manufacturers in sectors like machinery, aerospace, and automobiles are expected to benefit significantly. Big brands such as Jaguar Land Rover, Aston Martin, and Diageo are likely to see increased exports. British consumers may also benefit from lower prices on Indian imports, including both goods and services.

The deal also provides UK companies greater access to Indian government contracts. Under the FTA, British firms can bid for Indian non-sensitive government tenders worth over Rs 2 billion. This opens up access to around 40,000 tenders annually, valued at Rs 4.09 lakh crore.

Economically, the agreement is expected to be a long-term win for the UK. By 2040, the FTA could add $6.5 billion to the UK economy, with exports to India projected to increase by 69%, or $21 billion.

Why it matters

This deal marks a significant milestone for both countries. For India, it boosts labour-intensive exports and opens a major Western market. For the UK, it deepens economic ties with a fast-growing economy and showcases the post-Brexit trade strategy in action.

“This is a significant agreement,” said Foreign Secretary Vikram Misri. Trade Minister Piyush Goyal will accompany PM Modi for the formal signing ceremony.

With FTAs in place or under negotiation with major economies — from EFTA, ASEAN and Australia to the US and EU — India is building a strong global trade network. The India-UK deal could serve as a blueprint for others to follow.