In May 2025, India and the United Kingdom signed a landmark Free Trade Agreement (FTA), marking a major step in their Comprehensive Strategic Partnership. This agreement, described as the most ambitious trade deal ever signed by India and the largest post-Brexit deal for the UK, is poised to significantly boost bilateral trade, investments, job creation, and innovation.
What is a Free Trade Agreement (FTA)?
A Free Trade Agreement is a pact between two or more countries to reduce or eliminate customs duties on a large number of traded goods. FTAs often include liberalization of trade in services, promotion of bilateral investments, and cooperation on intellectual property, government procurement, and regulatory practices.
Under an FTA, partner countries may also ease non-tariff barriers, simplify customs procedures, and allow greater mobility of professionals.
India’s Growing FTA Network
- As of 2025, India has signed 16 FTAs, five of which were concluded after 2014—with Mauritius, the UAE, Australia, EFTA, and now the UK.
- India’s FTAs now ensure preferential trade relationships with over 90 countries.
- Key FTA partners include ASEAN, Japan, Korea, Australia, EFTA, and the UK.
- Ongoing negotiations are taking place with the EU, US, Peru, Oman, and Israel, though talks with Canada are currently on hold.
India–UK FTA: Key Features
Tariff Reductions
- 99% of Indian exports to the UK to enjoy zero duty
- India will cut duties on 90% of UK tariff lines, 85% of which will be fully tariff-free within 10 years.
- High-tariff goods such as whisky and gin will see duties cut from 150% to 75%, and eventually to 40%, over a decade.
- Automotive tariffs to be cut from over 100% to 10% under a quota system.
- Tariff cuts on goods like cosmetics, aerospace products, medical devices, electrical machinery, chocolate, biscuits, and salmon.
Products and Sectors Benefiting from Duty Reduction
- Imports from the UK with slashed tariffs include:
- Whisky, gin
- Medical devices
- Advanced machinery
- Lamb
- Cosmetics, aerospace parts
- Salmon, chocolate, biscuits, soft drinks
- Indian exports expected to gain:
- Textiles, leather, marine products
- Footwear, sports goods, toys
- Gems & jewellery, engineering goods
- Auto parts, organic chemicals
Impact on Services and Professionals
- Substantial boost expected in services trade, particularly in:
- IT/ITeS
- Financial and professional services
- Education and business services
- Eased mobility for various professionals, including:
- Contractual service suppliers
- Business visitors and investors
- Intra-corporate transferees and their families
- Independent professionals like yoga instructors, chefs, and musicians
- Digitally delivered services (e.g., architecture, engineering, telecom, computer-related services) secured under the agreement.
Double Contribution Convention (DCC)
- Indian workers posted temporarily to the UK will be exempted from paying social security contributions for three years.
- This move ensures significant financial savings for Indian service providers and improves their competitiveness in the UK labour market.
Projected Economic Gains
- Bilateral trade to double by 2030 from USD 60 billion.
- Expected to add £25.5 billion to bilateral trade, increase UK GDP by £4.8 billion, and wages by £2.2 billion
Types of Trade Agreements
| Agreement Type | Examples | Scope |
| FTA (Free Trade Agreement) | India–UK, India–UAE | Broad tariff cuts |
| PTA (Preferential Trade Agreement) | India–Thailand (Early Harvest Scheme) | Partial tariff cuts |
| CECA (Comprehensive Economic Cooperation Agreement) | India–Singapore | Goods + Services |
| CEPA (Comprehensive Economic Partnership Agreement) | India–Korea | Goods + Services + Investments |
| BTIA (Bilateral Trade and Investment Agreement) | India–EU (Under negotiation) | Pending conclusion |
| TEPA (Trade and Economic Partnership Agreement) | India–EFTA | New-age agreement |
The World Trade Organization (WTO) uses the umbrella term RTA (Regional Trade Agreement) for all such preferential pacts.
FTA and Zero Duty: Clarification
- “Zero duty” in an FTA refers to zero basic customs duty.
- Other domestic taxes like IGST and cess are still applicable.
- FTAs have negative/sensitive lists of items excluded from tariff concessions (e.g., select vegetables, spices, dairy, and autos).
Benefits of FTAs
- Market access for Indian exporters at zero or reduced tariffs.
- Increased competitiveness countries with existing FTAs.
- Boost to FDI, domestic manufacturing, and integration into global value chains.
- Consumer welfare due to cheaper imports.
- Strengthened bilateral ties and economic diplomacy.
The India–UK Free Trade Agreement is a strategic milestone that not only deepens bilateral economic relations but also aligns with India’s broader trade policy goals of diversifying markets, promoting “Make in India,” and enhancing global competitiveness. As India pursues similar agreements with other economies, the FTA landscape will continue to be a key pillar of its economic diplomacy.
