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India has signed a historic Free Trade Agreement (FTA) with the United Kingdom, aiming to boost merchandise exports and strengthen bilateral trade between the two democracies. This mutually beneficial and forward-looking agreement aligns with India’s vision of Viksit Bharat 2047 (Developed India 2047) and complements the growth aspirations of both nations.
After over a decade of negotiations, the agreement will enable 85 percent of tariff lines and 66 percent of existing Indian imports from the UK to qualify for tariff-free entry into India. This includes UK food and drink products such as chocolate, gingerbread, sweet biscuits, soft drinks, and non-alcoholic beer, along with advanced manufacturing exports like auto parts, machinery, tools, and medical technology devices, including surgical, dental, and veterinary instruments.
The FTA is expected to have a positive impact on manufacturing, particularly in labour- and technology-intensive sectors. It opens new export opportunities for industries such as textiles, marine products, leather, footwear, sports goods, toys, gems and jewellery, engineering goods, auto parts, engines, and organic chemicals. Additionally, the agreement is anticipated to generate significant employment gains in India.
Under the agreement, India will eliminate, reduce, or maintain zero tariffs on 90 percent of tariff lines, covering 92 percent of existing goods imports from the UK (based on 2022 trade data). This move represents tariff reductions worth over £400 million initially, projected to more than double to approximately £900 million after 10 years. By lowering trade costs, the FTA is expected to enhance trade flows and contribute to UK economic growth. In the long run, bilateral trade is projected to increase by £25.5 billion annually, with £15.7 billion of this growth driven by rising UK exports to India.
The Indian viewpoints
The FTA with the UK is a modern, comprehensive, and landmark agreement designed to achieve deep economic integration through trade liberalization and tariff concessions. It ensures extensive market access for goods across all sectors, addressing India’s key export interests. India will benefit from tariff elimination on approximately 99 percent of tariff lines, covering nearly 100 percent of the trade value, creating vast opportunities to boost bilateral trade between India and the United Kingdom.
Madan Sabnavis, Chief Economist at Bank of Baroda, stated, “India will benefit from the FTA commitments made by the United Kingdom in services such as IT/ITeS, finance, professional, business, and educational services, opening up new opportunities and jobs. It eases mobility for professionals, including contractual service suppliers, business visitors, investors, intra-corporate transferees, their partners, dependent children with the right to work, and independent professionals such as yoga instructors, musicians, and chefs.”
The agreement unlocks immense opportunities for talented and skilled Indian youth in the UK, a major global hub for digitally delivered services due to its robust financial and professional services sectors and advanced digital infrastructure. India has secured significant commitments for its service suppliers, particularly in professional domains like architecture, engineering, computer-related services, and telecommunications.
Under the Double Contribution Convention, Indian workers temporarily employed in the UK, along with their employers, will be exempt from paying social security contributions in the UK for up to three years. This will result in substantial financial savings for Indian service providers, enhancing their competitiveness in the UK market, creating new job opportunities, and benefiting many Indians working in the UK.
India has also ensured that non-tariff barriers are appropriately addressed to facilitate the free flow of goods and services, preventing unjustified restrictions on its exports. The FTA seeks to promote good regulatory practices and improve transparency, aligning with India’s ongoing domestic reforms to enhance the ease of doing business.
The UK viewpoint
The UK has stated that this deal is expected to boost UK GDP by £4.8 billion and UK wages by £2.2 billion annually in the long run. UK products are projected to save up to an estimated £400 million a year due to India cutting tariffs on existing trade, with these savings potentially increasing to around £900 million annually after a 10-year staging period. This will support exports from high-growth sectors such as advanced manufacturing—including automotive, electrical circuits, high-end optical products, and medical devices. Additionally, tariff reductions will benefit products such as cosmetics, whiskies, and agri-food items like gin, soft drinks, and lamb.
The agreement also covers services such as telecommunications and construction. In financial and professional business services, measures like binding India’s foreign investment cap for the insurance sector will ensure UK financial services companies are treated on an equal footing with domestic suppliers. Furthermore, UK businesses will gain access to India’s public procurement market, which includes approximately 40,000 tenders valued at a minimum of £38 billion annually.
UK companies will also receive exclusive treatment under India’s Make in India policy. Currently, this policy provides preferential treatment for federal government procurement to businesses that manufacture or produce within India. Under the agreement, UK companies will qualify as Class 2 suppliers if at least 20 percent of their product or service originates in the UK. This grants them the same status currently reserved for Indian firms. The Make in India preference for Class 1 suppliers—offering 50 percent or more of their goods or services from India—will remain unchanged. The deal also includes market access benefits for advanced manufacturing and medical technology companies within the broader life sciences sector, as well as for clean energy businesses.
Tariff cut
Indian imports of whisky/whiskey from the UK, valued at over £200 million annually in 2022 and currently subject to Indian tariffs of 150 percent, will see duties reduced to 75 percent on day one and further staged to 40 percent by year 10. Gin will benefit from the same tariff reductions.
UK car manufacturers will gain from a quota-based tariff reduction, with rates dropping from over 100 percent to 10 percent. This initially applies to internal combustion engine (ICE) vehicles but will gradually transition to include electric vehicles (EVs) and hybrids, reflecting the evolution of UK manufacturing. Similarly, Indian access to the UK market for EVs and hybrids will be phased in under a quota system to support the UK auto industry’s transition to fully electric vehicles.
The agreement will also significantly benefit UK cosmetics and toiletries exporters, who have experienced rapid growth in Indian sales despite current tariffs ranging from 10 to 20 percent. Under the FTA, tariffs on products such as soaps, shaving cream, face cream, and nail polish will either be eliminated on day one or phased out over 10 years. Additionally, tariffs on perfumes and eau de cologne, currently at 20 percent, will be halved after staging, creating new opportunities for exporters and reducing costs for consumers.
A senior executive from the Plastics Export Promotion Council (Plexconcil) stated, “The India-UK Free Trade Agreement (FTA), effective from May 6, 2025, is expected to boost India’s plastic exports to the UK, with projections reaching USD 800 million by 2027. The FTA eliminates UK import duties on plastic products, giving Indian exporters a competitive edge in pricing and market access.”
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
