The UK and India have sealed a historic Free Trade Agreement, opening the door to billions in trade, lower tariffs, and a stronger economic bond. This landmark deal marks a turning point in bilateral relations—one that promises growth, opportunity, and global influence for both nations
Geeta Singh
The United Kingdom and India have taken a major step toward reshaping their economic relationship. The new Free Trade Agreement (FTA), years in the making, promises to boost trade, lower prices, and create new opportunities for businesses and workers in both countries. From cheaper Scotch whisky to smoother market access for high-tech components, this deal will affect everything from dinner tables to factory floors. It also reflects India’s growing strength in global negotiations and the UK’s push to forge new post-Brexit trade ties.
A Major Breakthrough After Years of Talks
After more than three years and fourteen rounds of negotiations, the UK and India have finalized a landmark FTA. The deal is expected to be formally ratified by UK Prime Minister Keir Starmer during a high-profile visit to India later this year. This is the UK’s most significant bilateral trade deal since leaving the European Union. Its impact will be felt across industries—from food and drink to high-tech manufacturing—unlocking billions in potential growth. Its impact will be felt across businesses and workforces in both countries, ushering in an era of enhanced economic collaboration. Given India’s robust economic growth rate and its trajectory towards becoming the third-largest global economy by 2028, this agreement comes at an opportune time, promising mutual economic benefits and a deeper strategic partnership.
Strengthening Trade Ties
The existing UK-India trade relationship in 2024 already boasts an impressive trade volume of £43 billion, with UK exports amounting to £17.1 billion and imports reaching £25.5 billion. However, the newly inked FTA is projected to significantly amplify this exchange. Government econometric models predict a surge in bilateral trade by as much as 39 percent, concurrently bolstering the UK’s Gross Domestic Product (GDP) by an estimated £4.8 billion, or 0.1 percentage points annually. This agreement arrives at a particularly opportune juncture, given India’s dynamic economic trajectory.
India is anticipated to maintain a robust annual growth rate of 6 percent, positioning it as the world’s third-largest economy by 2028, trailing only the United States and China. The country’s 1.4 billion-strong population and its growing middle class with increasing disposable income, presents an unparalleled market opportunity.
Forecasts indicate a staggering 144 percent expansion in the country’s import demand between 2021 and 2035. This potent combination of vigorous economic expansion and a growing consumer base underscores the compelling rationale behind the FTA, promising substantial mutual benefits.
Tariff Reductions and Market Access
A cornerstone of the agreement lies in the mutual commitment to tariff liberalization. India has pledged to immediately reduce its formidable 150 percent tariffs on iconic UK spirits such as Scotch whisky and gin to 75 percent, with a further phased reduction to 40 percent within the subsequent decade. Similarly, tariffs on a range of UK food products, including lamb, salmon, and cheeses, will be progressively eliminated from their current levels of approximately 30 percent.
Beyond tariff reductions, the FTA incorporates measures aimed at streamlining trade processes. This includes the simplification of trade regulations, such as expedited customs processing, the reduction of non-tariff barriers like complex labeling requirements, and enhanced support mechanisms for small and medium-sized enterprises (SMEs). The assurance of timely customs clearance is particularly crucial for perishable goods like Scottish salmon, where delays can significantly diminish product shelf life and marketability.
Likewise, UK exporters of products such as biscuits and cheese will benefit from reduced bureaucratic hurdles, enhancing their competitiveness within India’s expanding consumer market. Furthermore, the agreement removes existing limitations on the number of UK businesses permitted to deliver services in key sectors including telecommunications, environmental services, and construction. Notably, UK service providers will no longer be mandated to establish a physical presence in India or maintain residency to operate within these sectors. Conversely, upon the FTA’s entry into force, a process that may take up to a year, the UK will grant duty-free access to 99 percent of Indian imports.
Sectors poised to gain significantly from this provision include footwear, textiles and apparel, as well as processed prawns, basmati rice, and ready-to-eat meals. These tariff reductions are expected to translate into lower prices for UK consumers, given the current tariff rates of 12 percent and 16 percent on clothing and footwear, respectively. Even the luxury car market will witness a substantial reduction in tariffs, plummeting from over 100 percent to 10 percent under mutually agreed quotas.
The FTA also enshrines zero tariffs on crucial industrial machinery, advanced materials vital for high-technology industries, and components for electric vehicles. This strategic provision positions British suppliers advantageously within India’s burgeoning manufacturing sector, recognized as the world’s second-most attractive manufacturing destination after China.
Key Tariff Changes
UK Exports to India: Spirits (e.g., Scotch whisky, gin): Tariffs reduced from 150% to 75% immediately, then phased to 40% over 10 years
Food products (e.g., lamb, salmon, cheese): Tariffs (around 30%) to be eliminated gradually
Industrial machinery, EV components, advanced materials: Zero tariffs, enhancing UK’s access to India’s growing manufacturing sector
No more requirements for UK service companies to maintain a physical presence in India
Indian Exports to the UK:
99% of goods will receive duty-free access, including:Footwear (currently 16% tariff)
Clothing/textiles (currently 12%)
Processed prawns, basmati rice, ready-to-eat meals
Luxury cars: Tariffs to drop from over 100% to 10% under agreed quotas
Mobility and Workforce Benefits
Addressing concerns regarding potential impacts on the workforce, the agreement incorporates a “double contribution convention.”This provision grants a three-year exemption from national insurance contributions for Indian employees temporarily working in the UK. Crucially, this is a reciprocal arrangement, likely applicable primarily to employees seconded between the two countries, mitigating concerns about UK workers becoming comparatively more expensive to hire. While no immediate alterations to immigration policies are anticipated, the FTA will facilitate smoother movement for skilled professionals between the two nations.
UK providers of services such as construction and telecommunications will gain enhanced access to India’s rapidly growing market. Both countries have also committed to actively encouraging the mutual recognition of professional qualifications, fostering greater labor mobility and collaboration. To oversee and support this initiative, a dedicated professional services working group comprising government officials from both the UK and India will be established.
Strategic Implications Amid Global Trade Shifts
Against a backdrop of escalating global protectionism and geopolitical complexities, the UK-India FTA stands out as a strategically significant accord. It also represents a pivotal milestone in Britain’s “Indo-Pacific tilt,” a strategic approach aimed at diversifying trade relationships and mitigating over-reliance on any single region or country-centric supply chains. This proactive strategy provides UK firms with a crucial hedge against potential future disruptions, such as further tariff shocks from the United States. In a global landscape marked by US tariff policies and persistent supply chain vulnerabilities, securing preferential access to the world’s fastest-growing major economy constitutes a strategic triumph for the UK.
From India’s perspective, the trade agreement aligns seamlessly with its ambition to emerge as a prominent “China-plus-One” manufacturing hub, encouraging businesses to diversify their investments beyond China. The deep-rooted historical ties between the UK and India, underpinned by enduring cultural, educational, and interpersonal connections, provide a strong foundation for this enhanced economic partnership.
A Forward-Looking Economic Partnership
This trade agreement is more than just a deal—it marks the beginning of a new chapter in UK-India relations. It reflects India’s growing role as a global economic force and the UK’s ability to secure major trade partnerships beyond Europe.
As India continues talks with the European Union and the UK seeks to expand its trade footprint, this FTA sets a powerful precedent. It promises real-world benefits: more competitive prices, stronger supply chains, and new opportunities for people and businesses in both nations. This agreement heralds a new era of economic collaboration, promising mutual prosperity and strengthened bonds between two significant global economies.
