New Horizons for Indian Businesses
The recently finalized
India–UK Free Trade Agreement (FTA) marks a transformative milestone in the bilateral trade relations between both nations. With UK being one of India’s largest trading partners as well as a strategic gateway for European markets, this FTA is structured to reduce trade barriers, promote investments, and open new business avenues across sectors.
India being cleared from tariffs on approximately 99% of its export lines to the UK, Indian companies especially in labour-intensive and engineering focused sectors are set to gain a competitive edge over other countries. With its mature infrastructure, huge market size, and strategic position, the UK economy offers a solid foundation for Indian exporters who aim to expand their global footprint. Below, we outline the
core sectors, in our understanding are best poised to benefit—and why.
Top 5 Sectors Overview
1) Agri Products & Processed Foods
Tariffs on above 99% of processed food tariff lines (tea, spices, mango pulp, and snacks) as well as animal and vegetable/oil products which previously ranged up to 70% has been eliminated. This
duty-free access will open premium UK retail channels for agri and processed food producers of India seeking scale and visibility. Additionally, the UK imports around US$ 37.5 billion in agricultural products annually, however, India contributes only US$ 811 million to that total – highlighting a significant untapped potential.
2) Textile and Apparel
With the FTA in place, Indian textile and apparel exporters will enjoy
zero-duty access, replacing previous tariffs of 8-12% on such items. This would level the playing field with major competitors like Bangladesh and Vietnam enabling Indian textile hubs such as Surat, Ludhiana, Tiruppur to aggressively expand globally.
3) Auto Components
US$ 1.3 billion worth of auto components were exported to the UK in 2024 from India, marking it one of the largest destinations for Indian auto parts. With tariffs (previously up to 10%) being aggressively eliminated in coming year, Indian manufacturers are set to gain a stronger edge against the competitors like China and Eastern Europe. Furthermore, demand for high-quality and competitive-cost parts – precision components, engines, EV spares - in the UK is expected to rise substantially putting India among the preferred sourcing hubs.
4) Leather Products & Footwear
Indian leather products and footwear exporters that were once taxed up to 16% can now access the UK market duty-free. This is an important win for artisanal MSME clusters located in Kanpur, Agra and Chennai, encouraging them to compete with traditional exporters like Turkey and Vietnam.
5) Engineering Machinery & Electrical Goods
India’s exports of industrial machinery, electrical equipment, and mechanical components to the UK stands at approximately US$ 3 billion annually. With previous tariffs of 4-14% now being reduced to zero, Indian suppliers of industrial machinery, pumps, turbines, and heavy engineering equipment are expected benefit significantly. The modernization of UK industries and investment in green infrastructure, Indian businesses have opportunities to capture larger contracts and long-term partnerships.
Other Sectors Poised for Growth
- Gems & Jewellery: Zero duty access will strengthen India’s exports of polished diamonds and gold jewellery, especially hubs like Gujarat’s Surat and Maharashtra’s Mumbai are well positioned.
- Chemicals: Preferential tariffs will boost exports of agrochemicals and specialty chemicals.
- IT & Professional Services: With easier visa access and 3-year exemption from UK social security contributions, IT consulting and IT-enabled services are expected to be far more competitive.
- Arms & Ammunition: While sensitive and tightly regulated, with duty free access, there would be niche opportunities under the defence sector.
How to Benefit from the India–UK FTA?
While FTA opens new avenues, it is important to understand how Indian exporters and service providers can extract maximum benefit from these preferential changes:
- Eligibility of Products/Services – First and foremost, identify whether your product or service falls under the zero-duty or preferential category.
- Understand Rules of Origin – Make sure that your products qualify as ‘Indian origin’ as per the FTA guidelines to claim the preferential tariffs.
- Obtain Necessary Certifications – Identify and secure the necessary certifications such as Certificates of Origin, quality certifications as well as sector specific certifications recognized in the UK
- Adapt to UK Standards & Regulations – Ensure your product aligns with the UK regulations especially in food safety, packaging, labelling and other technical standards.
- Develop a Market Entry Strategy – Determine the best market entry strategy – direct export, distribution or set up local entity - based on your sector and business objectives.
- Leverage Professional Mobility Benefits – For professional and service sector, use the relaxed visa access, social security exemptions and other benefits.
- Engage with Buyers & Partners – Participate in trade fairs, connect with consulates and use other networking channels to build relationships UK distributors, buyers and agents to improve visibility.
How can ILOC support you with Expansion?
Successfully navigating this transformative agreement effectively and using it to your advantage requires specialist guidance – from identifying right opportunities to implementing the entry strategy. ILO Consulting along with our legal division offer integrated consulting support specifically tailored for cross-border success covering:
- Market Access Strategy – Understanding your products / services and designing a customized UK market entry strategy while considering the regulatory frameworks, product classification, and tariff implications.
- Partner Search– Leveraging our strong network and relationships in the UK, we help in identifying and facilitating connections with UK distributors, importers, agents, or technology collaborators best matched to your needs.
- Entity Setup & Compliance – Support with establishing an independent entity or branch or sales office in the UK while managing the incorporation process, tax planning, employment law, and compliance.
- Trade & Customs Facilitation – Guidance on the rules of origin, securing necessary certification and approvals and custom procedure.
- M&A, Joint Ventures and Strategic Investments – Structuring and advising on cross-border JVs, investments and tech licensing arrangement as per India and UK regulations.
The landmark India-UK FTA is reshaping the global trade landscape with dramatically reducing the barriers and encouraging export potential. This is a rare window to scale, innovate and internationalize for Indian manufacturers and service providers. Let’s connect and see how you can benefit from these new opportunities!
