India–UK Free Trade Agreement 2025: A New Era for Bilateral Trade and Economic Growth

Introduction

India and the United Kingdom have just signed a Free Trade Agreement (FTA) which is a big step forward in their economic relationship. Leaders from both countries are calling this deal a major step that will not only create new opportunities but enhance the partnership between both nations.

The updated list of products on which duty will become zero has been mentioned below:

Impact of the FTA

Despite trade barriers, the India-UK relationship has maintained strong. India was Uk’s 12^th largest trading partner, with bilateral trade reaching GBP 43 billion in 2024. The newly signed FTA is set to change and reshape this dynamic. Under the agreement, UK will eliminate tariffs on 99% of Indian goods, while India will reduce import duties on 90% of British imports. Majority of the UK products will become completely tariff-free over the next ten years.

This agreement builds on an already growing trade relationship. India has enjoyed a trade surplus, with the FTA in place it is expected to further accelerate this growth. According to the projections, it could add GBP 4.8 billion pounds annually to UK economy by 2040, while giving Indian businesses wide market access and easing regulatory hurdles.

Strategic Benefits for India

For India, the agreement brings several strategic advantages:

• Boost to Exports: India exporters present in various sectors will now find it easier to enter and compete in the UK market.

• Strengthening Trade Surplus: The deal helps India build on its current trade surplus, translating into higher export earnings.

• Sectoral Benefits: Industries which are labor intensive and have manufacturing competitiveness like textiles, leather, marine products, sports goods and jewellery stand to benefit the maximum

• E-Commerce Growth: Direct-to-consumer brands can more easily target UK marketplaces such as Amazon UK or Etsy, benefiting from simplified import rules and streamlined logistics.

• Capital Access and Financing: Businesses in India will have a better access to the UK’s financial expertise and funding opportunities for green and sustainable infrastructure projects. This includes the chance to raise capital in London’ financial markets, which opens exciting new paths for project financing and corporate expansion.

Impact for Indian Exporters

The FTA creates tangible opportunities for Indian businesses of all sizes. The major sectors are:

• Textile Industry: Textile producers across India currently face tariffs of 8-12% in the UK. With the FTA coming in place, Indian businesses can now price their products more competitively against regional competitors like Bangladesh or Vietnam in the UK market. This will further enhance the exports of textile sector which already accounts for over 10% of India’s total exports.

• Automobile and Parts: Indian auto components face tariffs of up to 18% in the UK. With tariff cuts, Indian manufacturers who export over USD 20 billion worth of components globally can tap into UK’s demand for high quality parts, especially in EV vehicles.

• Agri and Marine Products: Agriculture and marine products like rice, prawns and spices face UK tariffs of around 5-20%. The FTA will reduce these and help Indian exporters increase their market share globally, where India already holds a Top 5 position globally for marine products.

• Service Sector Growth Opportunities:

  1. IT and IT-enabled services: Indian IT companies are set to gain better access to the UK's tech market, paving the way for more extensive service delivery and exciting partnerships.

  2. Financial and Professional services: Indian financial institutions and professional service providers will find it easier to establish a foothold and offer their services in the UK market.

  3. Education and Training services: There's a growing opportunity for collaboration in the education sector, allowing Indian institutions to provide valuable services to UK students and professionals. 

Compliance Essentials for Exporters

To fully benefit from the India-UK FTA, exporters need to stay on top of a few major compliance steps:

• Certificate of Origin: This document proves that goods are genuinely from India or the UK. Without it, businesses may lose out the duty-free benefits and face regular WTO tariffs instead.

• Correct Product Classification: Using the right HS code is important. If a product is wrongly classified, it could easily delay shipments, attract fines or cancel out tariff exemptions which will directly affect the margins

• Accurate Documentation: Exporters must keep all relevant customs and shipping documents for at least five years. This helps meet audit standards and keeps the export process transparent.

• Expert Guidance: Working with experts for trade compliance of FTAs can help avoid costly mistakes and ensure all procedures are followed properly.

Economic Impact and Employment Opportunities

The FTA is expected to generate employment across various sectors in India:

• Agricultural and Processed Foods: Tariffs will nearly be eliminated on animal products (99.3%), vegetable/oil products (99.8%), and processed foods (99.7%)

• Industrial Goods: Zero tariffs will apply to a wide range of items including minerals, chemicals, plastics, rubber, leather, wood, paper, textiles, clothing, headgear, glass, ceramics, metals, machinery, and various manufactured products

Opportunities for the UK Industries

UK industries will also enjoy considerable benefits:

• Alcohol: Tariffs on Scotch whisky and other premium spirits will be reduced from 150% to 75% initially, and further down to 40%, making the more affordable in India.

• Automotive Sector: Tariffs on UK manufactured cars like Jaguars and Land Rovers will see tariffs cut from over 100% to just 10% under a quota-based system.

• Consumer Goods: Lower duties on UK exports like cosmetics, aerospace parts, lamb, medical devices, salmon, electrical machinery, soft drinks, and chocolates will help British brands access Indian consumer more easily.

Professional Mobility and Services

One of the standout features of this FTA is the support for professionals working across borders:

• No Restriction Work: Indian professionals can now work in the UK without being restricted by the current immigration point system.

• Further Rewards: More categories such as chefs, musicians, and yoga practitioners have been added to UK’s visa pathways.

• Double Contributions Convention: It ensures professionals won't have to pay social security contributions in both countries.

Looking Forward

While the signing of the FTA is a big win, the next challenge is making sure it works smoothly and benefits both countries over the long term. Here are few important areas to focus on:

• Joint Oversight Committees: Creating dedicated committees can help both sides keep an eye on how the FTA’s being implemented, tackle issues more quickly, and make sure the rules are applied consistently.

• Tracking Non-Tariff Barriers: Beyond tariffs, trade is often slowed down by differing product standards and regulations. Aligning these will help smoother access to each other’s markets.

• Boosting Digital Trade: Developing solid frameworks for online trade, data protection and cybersecurity will be key to encouraging innovation and e-commerce growth.

• Training and support for SMEs: Smaller businesses will need help navigating export procedures. Capacity building programs can guide them on compliance, paperwork and making the most of new opportunities.

• Easing workforce mobility: Enforcing provisions that avoid double social security taxation for workers will support the free movement of professionals across both countries.

• Setting a Global Example: This FTA could become a blueprint for similar trade deals with other countries, strengthening India’s global trade position and opening more doors for exporters.

This agreement is more than just a trade deal. It is a new phase in the long-standing India-UK relationship. It promises to enhance trade, reduce costs and create jobs in both countries. With implementation underway, businesses and consumers can see real, on-the-ground benefits across industries from traditional manufacturing to modern service sectors.