Zero-duty market access, push for services and labour-intensive sectors and more: How the trade deal with UK will benefit India
On the 24th of July 2025, India and the United Kingdom signed the historic India-UK Free Trade Agreement (FTA) in the presence of Prime Ministers Narendra Modi and UK PM Keir Starmer in London. Officially known as the India-UK Comprehensive Economic and Trade Agreement (CETA), this deal marks a new era of economic collaboration and massive mutual benefits for the signatory nations across various sectors.
While the bilateral trade between the two countries currently stands at nearly USD 56 billion, the FTA has a joint goal to double this figure by 2030 taking it to USD 120 billion.
Duty-free access for 99% of India’s exports and greater access to UK markets
Under the UK-India FTA, India has gained access for 99% of its exports to the UK, covering entire trade basket. This opens opportunities for labour-intensive industries such as textiles, marine products, leather, footwear, sports goods, toys, and gems and jewellery, alongside fast-growing sectors like engineering goods, auto components, and organic chemicals. Currently, Indian goods in these industries faced UK tariffs between 4 to 16 per cent.
In the textile sector, current UK tariffs of 8–16% will be removed. This waiver will benefit companies like Welspun India, Arvind Ltd. Meanwhile, the zero-duty access to UK markets in the footwear industry will benefit manufacturers in Agra, Kanpur, and Chennai, with Bata India and Relaxo emerging as top gainers. It is estimated that leather and footwear exports to the UK may cross $900M.
Similarly, a duty-free market access (current tariffs up to 16 per cent) in jewellery sector, will benefit Indian exporters from Gujarat and Maharashtra.
The FTA also offers greater market access in Information Technology and IT-enabled services, financial and legal services, professional and educational services, and digital trade. Indian professionals, including those deployed by companies to work in the UK across all service sectors, professionals deployed on contracts such as architects, engineers, chefs, yoga instructors, and musicians, will benefit from simplified visa procedures and liberalised entry categories.
In addition to increasing export volumes and promoting domestic production and job creation in these vital sectors, the immediate removal of these tariffs will increase the competitiveness of Indian goods on the British market. The UK leather industry alone is predicted to increase its market share by 5% in the next two years, while exports of engineering and electronics are likely to double by 2030.
Tariff changes in alcoholic beverages, automobiles, seafood, Auto components and engineering goods, Pharmaceuticals and medical devices
The FTA provides significant reductions and concessions in tariffs on several goods. Scotch whisky and gin import taxes will be reduced from 150% to 75% instantly, and then to 40% over the following ten years. Under a quota-based system, the present 100% tariff on automobiles made in the UK will be reduced to 10%. In the meantime, India will lower or do away with duties on goods including medical equipment, cosmetics, salmon, chocolates, and biscuits.
Under the FTA, India’s seafood gets zero-duty access to UK’s $5.4B marine market and thus, the fisherfolk in Andhra, Odisha, Kerala, Gujarat and TN will benefit directly. Shrimp, tuna, fishmeal and feeds have become 100% duty-free. Now, Indian exporters will gain parity with EU giants like Germany & Netherlands.
Push for inclusive growth
The India-UK FTA has also been designed to make trade more inclusive. Now, women and youth entrepreneurs, farmers, fishermen, startups, and MSMEs will gain access to global value chains, supported by provisions that encourage innovation, promote sustainable practices, and reduce non-tariff barriers.
Under the FTA, women artisans, MSMEs and SHGs get duty-free access to the UK’s $23B market.
Duty-free access to the UK’s $23B market opens doors for women artisans & entrepreneurs. IPR protection will boost innovation by women in biotech, textiles & beauty. Meanwhile, zero tariffs on textiles help weavers, stitchers & crafters reach premium buyers. Women-led SHGs, co-ops & MSMEs will also be provided support via training, finance & skilling.
Services sector expected to boom after India-UK FTA
The CETA also opens doors to myriad opportunities for India’s services sector. The deal makes it easier for Indian professionals to enter the UK market as musicians, chefs, yoga instructors, and other contractual service providers. Now, more than 1,800 chefs, yoga experts, and musicians can work in the UK each year. Relaxed rules will help intra-corporate transferees, investors, and business visitors.
The three-year exemption from social security contributions in the UK for Indian workers temporarily stationed there is a significant advantage for India. This exemption is expected to increase the draw and competitive edge of Indian talent in the UK by saving Indian professionals and their employers up to Rs 4,000 crore a year. It is projected that industries such as professional services, financial services, and information technology will see significant expansion and job opportunities.
Under the Double Contribution Convention agreement, around 75,000 Indian workers will be exempted from UK social security payments for 3 years. This will improve the cost competitiveness of Indian talent.
Moreover, the FTA will open access to 36 service sectors with no Economic Needs Test for Indian firms and freelancers. In addition, now Indian professionals can work in 35 UK sectors for 24 months, even without a UK office.
Increased business transparency and the UK’s gains
Not only has the UK opened its markets for India, but India too has allowed access to the United Kingdom in several non-sensitive sectors. The FTA lays down rules for public procurement, allowing companies from the UK to bid on Indian federal government tenders worth over Rs 200 crore in non-sensitive sectors.
In addition, opening lucrative Indian markets for the UK, this will also push Indian firms towards becoming more competitive. This landmark trade deal addresses innovation, intellectual property, and government procurement aspects. With this, there will be a more transparent business environment and will attract increased investments.
Moreover, luxury automakers like Aston Martin and Jaguar Land Rover (owned by Tata Motors) and UK-based companies like Diageo (Scotch whisky) will have better access to the Indian market. The UK government estimates indicate that the India-UK FTA is expected to boost the UK’s GDP by £4.8 billion a year.
At present, over 970 Indian companies operate in the UK, contributing approximately £1.17 billion in corporation tax and providing employment to around 1.1 million people, playing a vital role in supporting local economies and livelihoods.
For eligible traders, the FTA offers streamlined procedures such as monthly payment options and tariff suspension. Along with a commitment to clear goods within 48 hours, it also supports digital trade by enabling paperless customs procedures and electronic authentication.
With India deciding to lower its trade barriers and partnering up with a key economy like the UK, it will emerge as a magnet for foreign direct investment (FDI). Beyond traditional trade partnerships, India’s position as a reliable trade partner will also help it further diversify its economic engagements.
Along with the FTA, a Memorandum of Understanding was also signed by India’s Central Investigation Bureau and the UK’s National Crime Agency. Foreign Secretary Vikram Misri revealed the same during a special press briefing after the landmark trade deal was signed. He said that the objective of the MoU is to combat instances of corruption.
The MoU is important given that many economic offenders in India take shelter in the UK, as they consider it to be a safe haven. The agreement aims to enhance collaboration on cross-border investigations, asset recovery, and extradition of fugitives, including economic offenders. During his bilateral talk with PM Keir Starmer, Narendra Modi sought the UK’s cooperation in bringing economic offenders and fugitives from India to justice under Indian laws.
Indian trade bodies call India-UK FTA a “transformational milestone”
The Industry trade bodies and industry leaders have welcomed the signing of the India-UK Free Trade Agreement (FTA), terming the deal a “transformational milestone in bilateral economic relations” of the two countries.
Industry body Confederation of Indian Industry (CII), in a statement, added, “Once implemented, the India-UK FTA is expected to reduce trade barriers, enhance investor confidence, and promote joint ventures and technology transfers, especially in labour-intensive sectors like textiles and apparel, leather and leather goods, gems and jewellery, and marine products, among others.”
“The agreement will provide a strong framework for unlocking new opportunities in clean energy, digital technologies, life sciences, and advanced manufacturing. India’s rapidly growing market and manufacturing capabilities, combined with the UK’s strengths in innovation, finance, and high-end services, will further accelerate bilateral economic relations,” CII’s statement added.
Meanwhile, Sunil Bharti Mittal, Founder & Chairman of Bharti Enterprises and Co-Chair of the India-UK CEO Forum, applauded the deal, saying, “Indian industry across all sectors welcomes the India-UK FTA with great optimism. This agreement establishes a modern, forward-looking partnership that will stimulate innovation, ease market access, and foster investment. Businesses in India as well as the UK stand to gain tremendously, as it lays the groundwork for scaling up bilateral cooperation across key growth sectors.”
Hemant Jain, President, PHD Chamber of Commerce and Industry (PHDCCI), also hailed the India-UK Free Trade Agreement and said, “The signing of the India-UK Free Trade Agreement is a landmark moment for Indian industry. We commend both governments for finalising a deal that promises to catalyse bilateral trade, enhance the competitiveness of Indian SMEs, and open new doors for industries in manufacturing, services, and technology sectors. The agreement is a testimony to the strategic depth that will lead to a doubling of bilateral trade to over USD 120 billion by 2030 with the UK.”
India-UK Vision 2035
On 24th July 2025, Indian Prime Minister Narendra Modi and his British counterpart Keir Starmer not only signed the Comprehensive Economic and Trade Agreement (CETA) but also endorsed the new “India-UK Vision 2035”. This long-term agreement centres on the commitment of India and the UK to work together for mutual growth, prosperity, and to shape a prosperous, secure, and sustainable world in a time of rapid global change.
As per a press release issued by the Indian Prime Minister’s Office (PMO), the India-UK Vision 2035 sets clear strategic goals and milestones, tracking a path for sustained future collaboration and innovation. The Vision focuses on growth and jobs in the UK and India, education and skills partnership, development of cutting-edge technology and research, transformative Climate Partnership, and defence and security partnership.
Why does the timing of the India-UK FTA matter
The signing of the India-UK Free Trade Agreement is a significant strategic move which comes at a time when geopolitical and trade tensions are escalating globally. With shifting loyalties and threats of sanctions, over-the-sky tariffs, especially as a means of nothing but retribution against countries like India, which bought Russian oil, India’s bolstering partnership with the United Kingdom holds special value. By diversifying its trade partners, although the UK has always been a reliable trade ally, India is countering US protectionism and curbing reliance on the US market in several sectors, as well as bolstering its influence in the Indo-Pacific.
Moreover, the India-UK FTA has also strengthened India’s leverage in negotiations with other major economies, especially the European Union, which is desperate now more than ever to sign a Free Trade Agreement with India. For the EU, a trade deal with India is not confined to commerce; rather, it is also crucial for its strategic interests in the Indo-Pacific region. Now the EU will be under pressure to come up with an agreement matching the scale of the India-UK FTA.
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