• Source:JND
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India-UK FTA: A free trade agreement was signed between India and Britain on Thursday, July 24, in London in the presence of Prime Minister Narendra Modi and his UK counterpart, Keir Starmer. The agreement, reached after nearly three years of negotiations, is India's first major bilateral trade deal with a developed country in more than a decade. Commerce and Industry Minister Piyush Goyal was also present on the occasion.

The agreement aims to double bilateral trade between India and the UK to USD 120 billion by 2030. Under the FTA, taxes on products like leather, shoes and clothing from India will be removed, and import duties on whiskey and cars coming from Britain will be reduced. The deal covers subjects like goods, services, innovation, government procurement and intellectual property.

After the signing of the agreement, it is required to be approved by the British Parliament before it comes into force. The two countries have also completed negotiations on a social security agreement, but talks on a bilateral investment treaty (BIT) are still going on.

What Is A Free Trade Agreement?

According to the International Trade Administration, a Free Trade Agreement is a treaty between two or more countries, through which they agree on certain mutual obligations affecting matters such as trade in goods and services, protections of investors’ interests and intellectual property rights.

How Did The India-UK FTA Happen?

The India-UK Free Trade Agreement process began with negotiations on a Deepened Trade Partnership in early 2021, which resulted in an Enhanced Trade Partnership agreement in May of the same year. On this foundation, formal negotiations were launched in January 2022.

However, political changes in both countries, including a change of Prime Ministers in the UK and the general elections in India, delayed the negotiations. The FTA talks picked up pace again after Keir Starmer became the British Prime Minister in mid-2024.

The agreement reached its final stage in early 2025 and was announced to be finalised on May 6, 2025. On Tuesday, the Union Cabinet approved it. Now it will be formally signed during Prime Minister Modi's visit to London on July 24, 2025, where Commerce Minister Piyush Goyal will also accompany him.

What Are The Benefits Of The India-UK FTA?

This India-UK Free Trade Agreement (FTA) is not just limited to trade in goods but also includes areas such as services, investment promotion, movement of workers, government procurement and cooperation on technical standards. However, agriculture and some sensitive financial services are currently out of the scope of this agreement.

A major part of the agreement is the reduction of duties. India has agreed to reduce or eliminate duties on about 90 per cent of products coming from Britain, while Britain will give duty-free access to its market to about 99 per cent of Indian exports.

As per some of the key announcements, India will make major cuts in import duties on premium products from Britain. According to Reuters, the 150 per cent duty on Scotch whisky and gin will be reduced to 75 per cent immediately and will be gradually brought down to 40 per cent over the next 10 years. Similarly, the 100 per cent duty on British cars under a special quota will be reduced to 10 per cent.

On the other hand, India's labour-intensive sectors such as textiles, footwear, gems and jewellery, chemicals, auto components and engineering goods will benefit from zero or reduced duty access to the British market.

The deal also includes a social security waiver, under which Indian professionals working in the UK will be exempted from paying social security contributions for the first three years. According to government estimates, this one waiver will save Indian workers about 4,000 crore rupees annually.

India-UK FTA: Which Sectors Will Benefit?

Textiles and Apparel: The 8 to 12 per cent duty on Indian clothing and home textiles in the UK will be eliminated, giving India a competitive edge over Bangladesh and Vietnam. Over the next three years, exports from this sector are projected to grow by 40 per cent, with Tiruppur, Surat and Ludhiana being the main hubs.

Gems, Jewellery and Leather: Gold and diamond jewellery as well as leather products will get duty-free entry into the UK, benefiting small and medium enterprises (MSMEs) exporters and luxury goods makers. Apart from this, the UK will also be used as a gateway for expansion into European markets.

Engineering Goods and Auto Components: With the UK removing duty on Indian machinery, tools and vehicle parts, India will get an opportunity to get deeper links with the UK and EU automotive and engineering supply chains. Pune, Chennai and Gurgaon will emerge as key growth centres for exports in this sector.

IT and Business Services: Relaxed visa rules and mutual recognition of professional qualifications such as engineering, architecture and accounting will allow more Indian professionals to work in the UK's IT, finance, law and healthcare sectors. The move is estimated to create 60,000 new jobs in the services sector over the next five years.

Pharmaceuticals and Medical Devices: Under this, Indian pharmaceutical companies will get faster approvals for their products in the UK, and the UK National Health Service (NHS) will have more access to affordable Indian generic medicines. India will benefit from easing regulatory rules, especially for generic drugs.

Food Processing, Tea, Spices and Marine Exports: Duties imposed by the UK on Indian processed foods, basmati rice, shrimp, spices and tea will be eliminated. The move will increase exports from states such as Kerala, Assam, Gujarat and West Bengal. Premium Indian food brands are expected to increase their presence in the UK retail market.

Chemicals and Speciality Materials: India hopes to double its chemical exports to the UK by 2030, giving a strong boost to manufacturers in Gujarat and Maharashtra. Duties on agro-chemicals, industrial chemicals and plastics will be reduced.

Green Energy and Clean Technology: The UK is expected to invest in India’s renewable energy sector, creating opportunities for Indian companies to co-develop green technology solutions. Joint ventures and technology sharing arrangements will be established in areas such as solar power, hydrogen, energy storage and electric vehicle (EV) infrastructure.

Alcoholic Beverages (benefiting the UK): Over the next ten years, India will reduce the duty on Scotch whisky from 150 per cent to 30 per cent. This will improve access for British spirits to the Indian market, while the hospitality industry and consumers here will benefit from lower prices.

When Will The FTA Come Into Effect?

The India-UK Free Trade Agreement was finally signed on Thursday, July 24, during Prime Minister Narendra Modi's visit to London. After signing, the agreement will have to be ratified by the UK Parliament under its treaty approval process before it can come into force. Cabinet approval has already been received from India, and initial administrative formalities are being completed.

Officials on both sides expect the agreement to come into force by mid-2026. During this time, technical working groups will work to finalise implementation protocols such as phased duty reductions, mobility arrangements and processes for access to government procurement.