On May 6, 2025, India and the United Kingdom finalized a historic Free Trade Agreement (FTA) alongside a Double Contribution Convention, marking a significant milestone in their economic and strategic partnership. This agreement, concluded after over three years of negotiations that began in January 2022, aims to deepen trade ties, enhance market access, and foster economic growth for both nations. Described as India’s most comprehensive FTA to date and the UK’s most significant post-Brexit bilateral trade deal, the agreement is poised to reshape trade dynamics between the world’s fifth and sixth largest economies. This article provides a detailed overview of the FTA, its key provisions, economic implications, and the trade landscape between India and the UK over the past three years, including major products traded.

Background and Negotiation Journey

The India-UK FTA negotiations were launched in January 2022, following a commitment made in May 2021 by then-UK Prime Minister Boris Johnson and Indian Prime Minister Narendra Modi to pursue an Enhanced Trade Partnership. The initial target was to conclude the deal by Diwali 2022, but complex issues, including tariffs on sensitive goods, visa arrangements, and social security provisions, led to multiple delays. Over 14 rounds of talks were held, with negotiations pausing in 2024 due to general elections in both countries. The process regained momentum in February 2025 under the leadership of UK Prime Minister Keir Starmer and Indian Prime Minister Narendra Modi, culminating in the agreement’s conclusion after a phone call between the two leaders.

Key sticking points included India’s demand for exemptions from the UK’s proposed Carbon Border Adjustment Mechanism (CBAM), greater access for Indian professionals in the UK, and a social security agreement to exempt Indian workers from UK contributions. The UK, in turn, sought reduced tariffs on high-value exports like Scotch whisky, automobiles, and lamb, as well as access to India’s government procurement market. Despite challenges, the final deal reflects a balanced compromise, addressing these concerns while aligning with both nations’ economic priorities.

Key Provisions of the India-UK FTA

The India-UK FTA is a comprehensive agreement covering 26 chapters, spanning goods, services, investments, intellectual property, digital trade, and emerging areas such as gender rights, consumer protections, labor rights, and anti-corruption measures. Below are the major highlights of the agreement:

Tariff Reductions and Market Access:

Indian Exports: 99% of Indian exports to the UK will enjoy duty-free access, significantly benefiting sectors like textiles, apparel, footwear, marine products, grapes, mangoes, leather, sports goods, toys, gems and jewelry, engineering goods, and auto parts. Over half of Indian exports already faced low or zero tariffs, but reductions on products facing moderate tariffs (e.g., textiles and apparel) will enhance competitiveness.

UK Exports: India will reduce tariffs on 90% of UK tariff lines, with 85% becoming fully tariff-free within a decade. Notable reductions include:

Whisky and Gin: Tariffs will be halved from 150% to 75% upon entry into force, further reducing to 40% after 10 years, a major win for the UK’s Scotch whisky industry in India, the world’s largest whisky market.

Automobiles: Tariffs will drop from over 100% to 10% under a quota system, boosting UK car exports.

Other Products: Tariffs on cosmetics, medical devices, advanced machinery, lamb, salmon, soft drinks, chocolates, and biscuits will be significantly reduced or eliminated, with some (e.g., lamb and soft drinks) dropping to 0% within seven years.

Services and Professional Mobility:

The FTA facilitates greater access for Indian professionals in the UK’s IT, healthcare, financial, and educational services sectors. While the UK’s points-based immigration system remains unchanged, the agreement includes provisions for around 100 additional visas annually for Indian workers, particularly in IT and healthcare.

The Double Contribution Convention exempts temporary Indian workers and their employers in the UK from making social security contributions for three years, a significant achievement for India, though it faced criticism from the UK’s Conservative opposition.

Investment and Government Procurement:

The UK gains access to India’s government procurement market, covering goods, services, and construction, benefiting sectors like transport, healthcare, and energy.

The agreement encourages bilateral investment, with India seeking to attract UK investment in manufacturing and technology, while the UK aims to leverage India’s growing middle-class consumer base, projected to reach 250 million by 2050.

Digital Trade and Innovation:

A dedicated digital trade chapter promotes growth by reducing red tape, supporting electronic contracts, and fostering collaboration on emerging technologies like AI and data-driven industries. This will benefit UK businesses expanding into India and Indian tech firms accessing the UK market.

Intellectual Property and Regulatory Alignment:

The FTA improves patent procedures in India, reducing administrative burdens and enhancing transparency. It also commits India to review copyright terms and extend high-standard protection to UK geographical indications (GIs) beyond wines and spirits.

Social and Ethical Commitments:

For the first time in an Indian FTA, provisions on gender rights, consumer protections, labor rights, and anti-corruption are included, reflecting a modern approach to trade agreements. These align with the UK’s values and India’s developmental ambitions.

Customs and Trade Facilitation:

India will streamline customs processes, release goods quickly, and publish procedures in English online, making exports to India easier for UK businesses.

Economic Impact and Projections

The FTA is expected to significantly boost bilateral trade, which was valued at £42.6 billion in 2024. The UK’s Department for Business and Trade (DBT) projects the deal will contribute £4.8 billion annually to the UK economy and £2.2 billion in wages by 2040, with bilateral trade increasing by £25.5 billion annually, potentially reaching $100–120 billion by 2030. India anticipates enhanced export opportunities, job creation, and increased foreign investment, supporting its Viksit Bharat 2047 vision for a developed economy.

However, the Global Trade Research Initiative (GTRI) cautions that India’s trade benefits may be limited, as over half of its exports to the UK (e.g., petroleum products, medicines, diamonds, machine parts, airplanes, and wooden furniture) already face zero or low tariffs. The real gains will come from sectors like textiles and apparel, where tariff reductions will improve competitiveness.

Trade Between India and the UK (2022–2024)

Below is a detailed breakdown of bilateral trade in goods and services over the last three years, based on available data, with separate figures for exports and imports and major products traded.

2022 (Four Quarters Ending Q3 2022)

Total Trade: £34 billion

UK Exports to India: £14.8 billion (75.5% growth from 2021)

Goods: £6.8 billion (e.g., machinery, precious stones/metals, electrical equipment, whisky, chemicals)

Services: £8.0 billion (e.g., professional services, financial services)

UK Imports from India: £19.2 billion (37.3% growth from 2021)

Goods: £11.8 billion (e.g., readymade garments, medicinal/pharmaceutical products, refined oil, textile fabrics, metal manufactures)

Services: £7.4 billion (e.g., technical and trade-related services, IT services)

Trade Balance: UK trade deficit of £4.4 billion

Major Products Traded:

India to UK: Readymade garments, pharmaceuticals, refined oil, textiles, metal manufactures

UK to India: Pearls/precious stones, machinery, whisky, electrical equipment, chemicals

2023 (Four Quarters Ending Q1 2023)

Total Trade: £36.3 billion (34.2% growth from Q1 2022)

UK Exports to India: £14.7 billion (44.2% growth from Q1 2022)

Goods: £6.7 billion

Services: £8.0 billion

UK Imports from India: £21.6 billion (estimated, based on trade growth trends)

Goods: £12.5 billion (e.g., garments, pharmaceuticals, refined oil)

Services: £9.1 billion (e.g., IT, business services)

Trade Balance: UK trade deficit of approximately £6.9 billion

Major Products Traded: Similar to 2022, with increased focus on Indian IT services and UK whisky/automotive exports

2024 (Four Quarters Ending Q4 2024)

Total Trade: £42.6 billion (8.3% growth from Q4 2023)

UK Exports to India: £17.1 billion (5.8% growth from Q4 2023)

Goods: £7.7 billion (e.g., whisky, lamb, medical devices, machinery, automobiles)

Services: £9.4 billion (e.g., financial services, professional consulting)

UK Imports from India: £25.5 billion (10.1% growth from Q4 2023)

Goods: £10.1 billion (e.g., textiles, apparel, pharmaceuticals, marine products)

Services: £13.3 billion (e.g., IT, healthcare services)

Trade Balance: UK trade deficit of £6.0 billion

Major Products Traded:

India to UK: Textiles, apparel, footwear, marine products, pharmaceuticals, gems and jewelry

UK to India: Whisky, gin, lamb, salmon, medical devices, automobiles, cosmetics

Major Products Traded (Summary)

India’s Exports to the UK: Textiles and garments, pharmaceuticals, refined oil, marine products, leather, footwear, gems and jewelry, engineering goods, auto parts, grapes, mangoes

UK’s Exports to India: Whisky, gin, automobiles, medical devices, advanced machinery, lamb, salmon, cosmetics, soft drinks, chocolates, biscuits, precious stones/metals

Challenges and Considerations

Despite its potential, the FTA faces challenges:

Limited Gains for India: GTRI notes that many Indian exports already enter the UK at low tariffs, limiting the incremental benefit. Strategic focus on value-added sectors like textiles and services will be critical.

Carbon Border Adjustment Mechanism (CBAM): India’s request for an exemption from the UK’s CBAM was not addressed in the deal, raising concerns about potential future trade barriers, particularly for metal exports.

Implementation: The agreement awaits ratification by both nations’ parliaments, with formal signing expected during Prime Minister Starmer’s visit to India in 2025. Delays in legal formalization could impact timelines.

Strategic Significance

The India-UK FTA is a strategic move in a volatile global trade environment, particularly amid uncertainties like U.S. tariff policies under President Donald Trump. For the UK, the deal reduces reliance on the EU post-Brexit and strengthens ties with a fast-growing economy projected to become the world’s third largest by 2028. For India, it supports the “Make in India” campaign, enhances export competitiveness, and attracts investment in technology, healthcare, and manufacturing.

The agreement also aligns with India’s broader FTA strategy, which includes recent deals with the UAE, Australia, Mauritius, and the European Free Trade Association (EFTA). By prioritizing western partners like the UK, EU, and US, India aims to diversify its trade portfolio and reduce dependence on traditional Asian markets.

Conclusion

The India-UK Free Trade Agreement, finalized on May 6, 2025, is a transformative step toward deepening economic ties between two major global economies. By slashing tariffs, enhancing market access, and fostering collaboration in services, digital trade, and innovation, the FTA promises significant economic benefits, with bilateral trade projected to reach $100–120 billion by 2030. While challenges like the UK’s CBAM and limited incremental gains for India remain, the deal’s comprehensive scope and strategic alignment position both nations for long-term growth. As the agreement moves toward ratification, businesses and policymakers in both countries are gearing up to capitalize on new opportunities, heralding a new era of India-UK economic partnership.