After three years of negotiations, India and the United Kingdom have finalised a landmark Free Trade Agreement (FTA) that is set to reshape bilateral trade, enhance market access, and generate significant economic benefits for both nations.

The FTA eliminates tariffs on approximately 99% of tariff lines for Indian exports to the UK, covering nearly the entire trade value between the two countries. This move is expected to substantially boost the competitiveness of Indian goods in the UK market, particularly against exports from other countries that do not enjoy similar preferential access. Labour-intensive sectors such as textiles, footwear, carpets, automobiles, and marine products, which previously faced UK tariffs ranging from 4% to 16%, are anticipated to be the primary beneficiaries.

On the reciprocal side, India will reduce duties on 90% of tariff lines, with 85% of UK imports becoming duty-free over the next decade. This includes significant reductions for British exports such as whisky (from 150% to 40% over ten years), gin, cars (from 100% to 10% under a quota system), aerospace components, and various food items. The first year alone is expected to see Indian tariff cuts amounting to $550 million, rising to about $1.2 billion after ten years.

Key Goods And Sectors Included

Indian Exports Benefiting Most: Textiles, marine products, leather, footwear, sports goods, toys, gems and jewellery, engineering goods, auto parts and engines, and organic chemicals.

UK Exports Gaining Access: Whisky, gin, cars (including electric and hybrid vehicles), aerospace components, medical devices, advanced machinery, cosmetics, lamb, salmon, chocolate, biscuits, and soft drinks.

Services, Procurement, And Labour Mobility

The FTA also covers services, with India gaining improved access in IT/ITeS, financial, professional, and educational services in the UK. For the first time, UK businesses will have guaranteed access to India’s public procurement market, which includes approximately 40,000 tenders valued at least £38 billion annually. The agreement also facilitates easier movement for skilled professionals, including contractual service suppliers, business visitors, investors, and independent professionals such as yoga instructors and chefs.

A notable breakthrough was achieved on social security contributions. Indian professionals posted to the UK will be exempt from making social security payments for up to three years, a move expected to save Indian employees and companies over ₹4,000 crore, benefiting more than 60,000 IT sector employees alone.

Sticking Points And Sensitive Exclusions

Negotiations faced challenges over issues such as tariff reductions for sensitive agricultural products, social security contributions, and market access for services. India successfully excluded sensitive items like dairy products, apples, and cheese from tariff concessions, thereby protecting its domestic farmers. The social security exemption was another contentious issue, resolved in India’s favour.

What Is An FTA?

A Free Trade Agreement (FTA) is a pact between two or more countries to reduce or eliminate trade barriers-such as tariffs, import quotas, and export restraints-on goods and services traded between them. FTAs aim to boost trade and investment flows, promote economic growth, and strengthen economic ties.

Economic Impact And Strategic Importance

The agreement is projected to increase bilateral trade by £25.5 billion ($34 billion) annually and raise UK GDP by £4.8 billion in the long run. Indian manufacturing, already a global hub, is expected to see further growth, with the sector projected to account for 21% of India’s GDP by 2031. The FTA is also expected to create new job opportunities, foster innovation, and catalyse investment in both economies.

Conclusion

The India-UK FTA marks a historic milestone in bilateral relations, providing unprecedented market access, reducing trade barriers, and setting the stage for deeper economic cooperation. By addressing key sticking points and offering substantial concessions on both sides, the agreement is poised to deliver long-term benefits for businesses, workers, and consumers in both countries.

Agencies