How will the UK-India FTA  redefine economic ties between the two nations?

UK–India Free Trade Agreement (FTA) marks a major leap in bilateral economic ties. It eliminates tariffs on 99% of Indian tariff lines and reduces tariffs on 90% of UK lines, potentially boosting the UK economy by £4.8 billion annually by 2040. Indian sectors such as textiles, leather, agriculture, IT services, engineering goods, auto parts, and jewelry are poised to benefit from enhanced market access.

In brief

• Unlocking new trade corridors: The UK-India Free Trade Agreement includes tariff elimination on 99% of Indian and reduced duties on 90% of UK tariff lines. These UK-India Tariff Concessions significantly expand UK-India Market Access and bolster bilateral trade growth across priority sectors such as Indian textiles market growth, engineering goods exports, automotive tariff reductions, and life sciences industry expansion.
• Driving employment and innovation: The FTA supports job creation in India, especially in labor-intensive sector ,while enhancing the UK’s industrial competitiveness. It promotes technology transfer, investment, and innovation across key industries like clean energy delivering broad-based economic benefits of the UK-India FTA.
• Enhancing services and mobility: With ambitious commitments on services and professional mobility in FTA, including a social security waiver, the agreement facilitates increased Indian participation in sectors like IT and finance. This also encourages growth in digital trade services, further deepening the UK-India economic relationship.

On 6 May 2025, India and the UK took a significant step in their bilateral relations by finalizing a landmark Free Trade Agreement (FTA). This historic deal, hailed by the Indian government as “ambitious” and “transformative,” aims to significantly boost jobs, exports, and national growth for both nations. With the FTA allowing the elimination of tariffs on 99% of Indian tariff lines, covering nearly 100% of trade value, and reducing tariffs on 90% of UK tariff lines, the agreement is expected to deliver an estimated annual economic boost of £4.8 billion (US$6.4 billion) for the UK by 2040.

Benefits of the UK-India Free Trade Agreement

One of the most significant aspects of the UK-India FTA is the enhanced market access it provides to both countries. For the UK, 90% of its tariff lines may see reduced tariffs, particularly benefiting sectors such as beverages, automotive, medical devices, and advanced manufacturing. Products like whisky, gin, aerospace components, lamb, salmon, electrical machinery, soft drinks, chocolate, and biscuits are included. Automotive tariff reductions from over 100% to as low as 10% through a tariff rate quota system will significantly improve export competitiveness. For instance, tariffs on whisky and gin will decrease from a staggering 150% to 75% initially, and then to 40% over the next decade. This reduction is expected to boost scotch whisky exports to India, the world’s largest whisky market by volume.

On the Indian side, the agreement opens massive export opportunities by eliminating tariffs on 99% of its tariff lines. Sectors such as textiles, marine products, leather, and engineering goods stand to gain immensely. Additional sectors include footwear, sports goods, toys, gems, jewelry, auto parts, engines, and organic chemicals. The zero-duty access will not only enhance access to the UK market but also aligns with the government’s focus on job creation through FTA in labor-intensive sectors.

The economic implications of the India-UK FTA 2025 are profound. It is projected to increase the UK’s GDP by £3.3 billion by 2035 and double bilateral trade from US$60 billion (£42.6 billion) in 2024 to US$100 billion by 2030. This growth trajectory is expected to create significant job creation in India, where labor-intensive sectors like textiles and leather are expected to gain

The FTA aligns with the Indian government’s commitment to job creation in India through the UK-India trade deal, especially for its burgeoning youth population. As these sectors expand, they will likely create employment, thereby contributing to economic stability and growth.

Professional mobility under the UK-India Agreement

Another noteworthy feature of the the UK-India Free Trade Agreement is its ambitious commitment to enhance the mobility of professionals and services. Indian service providers, particularly in IT, financial services, and professional sectors, are likely to gain a competitive edge in the UK market. The FTA covers IT/ITeS, financial, professional (such as, architecture, engineering), and educational services. The agreement facilitates easier mobility for professionals, including contractual service suppliers and independent professionals. It also includes categories such as business visitors, investors, intra-corporate transferees, yoga instructors, musicians, and chefs.

Additionally, the introduction of a Double Contribution Convention (DCC) will exempt Indian workers temporarily in the UK from social security contributions for three years, similar to the UK’s Social Security Agreements with countries like Switzerland, Norway, and Canada. It will not affect access to benefits or the UK immigration health surcharge and will come into force alongside the broader FTA. This provision not only enhances competitiveness but also creates financial gains for both Indian workers and their employers. UK services sectors, including financial and legal services, also gain market certainty in India's growing economy.

Consumer benefits: A win for the public

The FTA promises to deliver tangible benefits to consumers in both countries. UK consumers can expect lower prices on Indian goods such as apparel, shoes, and marine products. Indian consumers may enjoy reduced costs on products from the UK, including whisky, cosmetics, and medical equipment. Additionally, access to cutting-edge technology and investment is expected to drive job creation in India.

Moreover, commitments on digitally delivered services and streamlined customs processes will enhance trade efficiency, making it easier for businesses to operate across borders.

Key sectors impacted: A broad spectrum of opportunities

The UK-India FTA 2025 is set to impact a wide range of sectors in both countries. In the UK, industries such as beverages, automotive, advanced manufacturing, and life sciences will benefit from reduced tariffs and improved market access. UK automotive manufacturers is likely to see enhanced competitiveness. Electrical machinery, optical products, and clean energy also feature prominently. Life sciences firms may benefit from simplified rules of origin.

In India, sectors like textile exports, leather, agriculture, and IT services may experience significant growth. The elimination of tariffs on textiles and apparel could boost exports and create jobs, while the IT sector may benefit from ambitious commitments that enhance its global standing. Other high-potential sectors include sports goods, toys, gems, jewelry, engineering goods, auto parts, engines, and organic chemicals.