The India-UK Free Trade Agreement (FTA) can be India’s signature trade achievement in the recent past. With the capacity to create new markets, reduce tariffs, and spur economic growth and innovation, this FTA is a real evidence of India’s increasing ambitions for international trade. The India-UK Free Trade Agreement is a strategic alliance between two major economies seeking to rethink trade dynamics and collaboration as Britain adjusts to life after Brexit and the globe recovers from the economic effects of the COVID-19 epidemic.
What is the Free Trade Agreement between the UK and India?
A free trade agreement is an agreement between two or more countries to lessen or do away with trade barriers like import quotas, export restrictions, and tariffs. By creating a more open and free atmosphere, these are utilized to promote investment and commerce.
Timeline of Negotiations
- January 2022: Formal negotiations between India and the UK officially began.
- April 2022: Discussions around an early harvest agreement took place but were ultimately postponed.
- 2023-2024: Multiple technical rounds were held, along with extensive consultations with stakeholders from both countries.
- 2025: The 13th and final round of negotiations was completed, culminating in the formal finalization of the agreement on May 6, 2025.
While the FTA marks a significant step forward in India-UK trade relations, its implementation will not occur until 2026 at the earliest, as both countries work through the necessary legal and procedural formalities.
The applicability of this FTA has increased manifold in the post-Brexit era with the UK looking to form deeper bilateral relationships outside the EU. Both countries, post-COVID, are looking to strengthen their economies, and this FTA offers a sound route towards bilateral recovery and growth.
UK-India Trade Statistics: A Snapshot
The trade between India and the UK is already substantial and expanding.
- Total trade (2023-2024): $20.3 billion
- Indian exports to the UK: ~$10.5 billion
- Indian imports from the UK: ~$9.8 billion
Top Indian Exports to the UK
- Textiles and garments
- Pharmaceuticals
- Information technology services
Top UK Exports to India
- Machinery and mechanical appliances
- Scotch whisky
- Luxury automobiles
As negotiations have started, there has been a 9% YoY growth in trade, showing a genuine economic interest in the establishment of closer trade partnerships.
Ways the FTA Helps Indian Companies
Business Opportunities for Startups and SMEs
Indian small and medium enterprises (SMEs) will gain significantly from the FTA:
- Lower tariffs on Indian wares such as clothing, leather, and electronics
- Easy compliance process for export to the UK
- Access to collaborative finance and innovation support for green and digital tech start-ups
Impact on IT & Services Industry
India’s IT and services industry, one of the vital export earners, stands to gain:
- Simple visa policies for technology specialists
- Recognition of Indian degrees and diplomas
- Access to UK’s legal, consulting, and fintech markets
Boost to Indian Agriculture & Textile Exports
India’s long-standing strengths in agriculture and textiles get a significant push:
- Lower tariff rates on Basmati rice, tea, spices, and garments
- Simplified phytosanitary clearances and quality conformity processes
- Competitive edge over rival Asian nations such as Bangladesh and Vietnam
Challenges for Indian Exporters – And How the FTA Mitigates Them
Indian exporters have traditionally been disadvantaged by:
- Tariff rates and duties
- Non-tariff barriers (NTBs) including packaging regulations and time-consuming paperwork
- Insufficient harmonized product standards
The FTA has the following objectives:
- Create regulatory convergence and technical cooperation
- Enhance transparency of UK’s procurement policy
- Provide mobility concessions for smooth business travel and cross-border services
The UK has also been willing to open doors for Indian professional talent, particularly in the fields of healthcare, information technology, and financial services.
What’s in the Agreement?
Trade in Goods
- Phased removal of tariffs on 90% of tariff lines
- Concessionary treatment for sensitive Indian sectors like agriculture and textiles
- Tariff rate quotas (TRQs) on specified UK products like whisky and cheese
Trade in Services
- Recognition of Indian qualifications in engineering, architecture, and accounting
- Access of Indian companies to deliver legal, IT, and healthcare services in the UK
- Commitments regarding non-discriminatory treatment in trade in services
Investment & Procurement
- Protection of investment provisions against arbitrary expropriation
- Access to UK public sector tenders in railways, construction, and technology
- Improved investor-dispute resolution procedures
Social Security & Visa Reforms
- Bilateral concurrence on National Insurance for avoiding duplicate payments
- Long-term and flexible visas for Indian business visitors and professionals
- Greater transparency in work permit processing
Economic Impact on India
The India-UK FTA is expected to yield quantifiable economic benefits:
- GDP Contribution: Forged estimate of additional 0.4-0.6% growth
- Job Creation: Thousands of jobs in Tier-1 and Tier-2 cities, specifically in manufacturing, textiles, IT, and logistics
- FDI Inflows: UK-based investment boosting, primarily in EV, education, and fintech sectors
- Enhanced cooperation with India’s “Make in India” and “Atmanirbhar Bharat” initiatives through export and manufacturing incentives
Smarter Shipping Begins Now – Discover Our Complete Digital Freight Platform.
Challenges & Criticisms
Although the FTA is popular, there are certain aspects of concern:
- Domestic industry resistance owing to apprehension of lower-priced UK imports in domestic markets
- Intellectual Property Rights (IPR) conditions that may encroach on access to low-cost medicines
- Labour and environmental terms-perceived as disguised protectionism or overpromises
These apprehensions are being met with focused stakeholder consultations and transitional protection.
What’s Next?
Doorstep talks, next step is:
- Government ratification and parliamentary approval
- Preparation of implementing guidelines and customs regulations
- Industry can expect early dividends by late 2025 or early 2026
How Indian Exporters Should Prepare
- Simplify compliance processes to UK levels
- Invest in supply chain improvement
- Tap government export incentives under programs such as RoDTEP and PLI
Expert Opinion: What Indian Trade Experts Are Saying
As per Dr. Arvind Panagariya, former Vice Chairman, NITI Aayog:
“This FTA has the potential to double our exports to the UK in the next five years.”
FIEO President Dr. A. Sakthivel has this to say:
“Apparel and pharma SMEs will gain the most. Exporters need to prepare themselves for scale and quality enhancement.”
The Confederation of Indian Industry (CII) advises:
- Setting up FTA readiness cells in export-oriented businesses
- Tying up with UK distributors to pilot the post-FTA situation in the best possible manner