The India–UK Free Trade Agreement (FTA) marks a historic moment in global trade. Finalised on May 6, 2025, this landmark deal strengthens the longstanding relationship between India and the United Kingdom. The FTA opens up opportunities to new trade and investment by enabling a greater degree of professional mobility. With bilateral trade already valued at over USD 60 billion and projected to double by 2030, the FTA promises to be a game-changer for both economies.
A Rapid Yet Strategic Breakthrough
Following an intensive negotiation phase that restarted in February 2025, India and the UK finalised their most ambitious bilateral trade agreement in record time. This deal is hailed as the most comprehensive FTA India has signed and is commercially significant for the UK post-Brexit.
Over the past two decades, India and the UK have consistently worked toward stronger trade ties. Key milestones include the Enhanced Trade Partnership (2021) and the Joint Economic & Trade Committee (JETCO). The FTA builds on these foundations with significant tariff cuts, enhanced service access, and increased market competition for foreign goods.
Tariff Elimination: A Win-Win Scenario
One of the most impactful outcomes of the FTA is the sweeping tariff reduction.
India will reduce tariffs on 90% of UK goods, including automotive, electronics, aerospace, processed foods, and beverages.
The UK will remove duties on 99% of Indian exports, encompassing engineering goods, leather, organic chemicals, marine products, gems, textiles, and auto components.
Tariff savings for UK exporters are estimated at over USD 541 million annually, and they are expected to grow to USD 1.22 billion in the next decade.
This creates a fertile ground for manufacturers, retailers, and consumers in both countries, fostering better supply chains, product accessibility, and competitiveness.
Unlocking Bilateral Trade Potential
As of 2024, bilateral trade stood at USD 60 billion. The FTA is expected to:
Boost trade by USD 34.53 billion
Contribute USD 6.5 billion to UK GDP
Increase wages in the UK by USD 2.98 billion annually
Create significant employment in Indian labour-intensive sectors such as textiles, footwear, and leather
The strategic aim is to double bilateral trade to USD 100 billion by 2030, supported by a more transparent and investor-friendly environment.
Key Sectoral Benefits
The India–UK FTA impacts nearly every high-growth sector. Here’s a breakdown of key beneficiaries:
Alcoholic Beverages
Tariffs on UK whiskey and gin will drop from 150% to 75%, then 40% over 10 years.
Scotch whisky exports to India are expected to rise to USD 1.35 billion in five years.
Around 1,200 jobs are likely to be created in the UK.
Automobiles
Based on a quota system, tariffs on luxury cars and electric vehicles will be reduced from 100% to 10% over a period of five years.
This enhances affordability and boosts the presence of UK automobile brands in India.
Cosmetics & Personal Care
India will eliminate tariffs on UK cosmetics with enhance market access, product diversity, and reduce cost for consumers and market entry.
UK brands like Boots, The Body Shop, and others will gain stronger access to India’s booming beauty market.
Textiles & Apparel
Indian garments such as shirts, trousers, and linens will enjoy zero-duty access.
India’s market share in UK apparel imports is expected to increase from 5.5% to 10%.
Pharmaceuticals & Medical Devices
India will reduce tariffs and align regulatory standards.
UK medical exports, such as surgical instruments and diagnostic equipment, will find it easier to enter the market.
Food, Agriculture & Marine Products
99% of current duties will be eliminated.
UK exports like cheese, chocolates, and biscuits will see increased demand.
Indian exports like grapes, mangoes, and marine goods will gain a market edge.
IT & Services
The FTA enhances access to Indian IT/ITeS and financial and educational services.
Indian service providers will benefit from reduced barriers and easier compliance.
Advanced Manufacturing & Clean Energy
For optical goods, semiconductors, aerospace components, and clean energy tech, trade barriers will be lowered.
Gems & Jewellery
Indian exporters will benefit from the elimination of tariffs and market diversification.
This is anticipated to increase India’s gem and jewellery exports to the UK from $400 million to $1 billion.
Boost for Small to Medium-Sized Artisans and Exporters in India.
Enhancing Professional Mobility
One of the FTA’s standout features is its streamlined visa and professional exchange framework.
Mutual recognition of architects, engineers, IT professionals, and more qualifications.
Separate points for business visitors and intra transferees under professionals.
And Independent Professionals, including chefs, musicians, and yoga instructors
Promotes youth mobility and international collaboration for Indian professionals.
Social Security Relief: Double Contribution Convention (DCC)
Indian professionals in the UK will be exempt from double social security contributions for up to 3 years.
This aligns India with countries like Canada and the EU, reducing the financial burden for Indian employers.
Climate Trade Clause: CBAM Watch
While the FTA brings significant gains, stakeholders are closely watching the rollout of the UK’s Carbon Border Adjustment Mechanism (CBAM) in 2027.
If CBAM is levied duties on Indian exports while UK imports remain duty-free, the agreement could become imbalanced.
Clarity about the policy and mutual concessions will be critical to maintaining parity.
Services, Innovation & Strategic Collaboration
This FTA is not only limited to goods, but also fosters cooperation in:
Technology and R&D: Encouraging collaborative research in AI, healthcare, and fintech.
Education: Supporting greater student exchange and institutional tie-ups.
Investment Protection: Reinforcing legal safeguards to ensure investor confidence.
Investor Confidence & Strategic Signals
The agreement reflects a shared vision of inclusive, innovation-led growth.
InCorp India experts describe it as a “strategic partnership” that transcends trade.
The deal enhances predictability and transparency, driving foreign direct investment (FDI).
It also sets the stage for India’s future FTAs with the EU, Australia, and Canada.
What Should Businesses Do Now?
As the FTA nears implementation, businesses across both nations should:
Revisit pricing and supply chain strategies to leverage duty savings.
Explore new joint ventures, especially in R&D and clean energy.
Understand The Rules of Origin and their terms under the FTA agreement between India and the UK are still under consideration. This results in an ongoing uncertainty for both Indian and UK exporters.
Helpfully, the UK government has stated that it has “secured India’s best agreement on Rules of Origin,” which will require that a product must either be wholly obtained or significantly transformed through processing in either country
Upskill personnel to meet service export requirements and visa eligibility.
Conclusion
The India–UK Free Trade Agreement is more than a trade pact. It is a strategic bridge strengthening the economic, professional, and cultural connections between two vibrant democracies. From Scotch whisky to software, textiles to technology, the FTA unlocks possibilities that will shape global trade for years.
Despite the multiple benefits, the possible downsides should also be considered, specifically in relation to the other FTAs signed and ongoing agreements. This deal sets a new gold standard for India’s international trade engagements, emphasising transparency, ease of business, and people-to-people connections. Stakeholders in both countries now have a unique opportunity to drive long-term prosperity and create jobs. Those exploring India Company Incorporation can also play a key role in shaping a resilient and future-ready global economy.
Are you ready to explore the full benefits of the India–UK FTA? The time to act is now.
