UK-India Free Trade Agreement“A Game Changer for India”

On July 2025, India and the United Kingdom inked a free trade agreement, which was the result of a laboured negotiation awash with hesitation and doubts. For London, this is the biggest trade deal undertaken post-Brexit. For Delhi, it is its first FTA ever with a European nation. This Agreement will play a pivotal role in increasing India’s exports to the UK, which currently is the 11th largest trade partner of the UK. Providing unprecedented access to a prestigious economy, it is likely to transform India into the 5th or even the 4th largest trading partner. Interestingly, it comes in an era where tariffs are heralding an impending Trade War due to their imposition being excessive and unethical.

It is perhaps a consequence of Brexit, as experts agree that the UK is longing for FTAs with non-European nations due to its somewhat awkward relationship with the EU. Brexit, as monumental as it was, had some negative implications on the economy. In order to curtail the fallout, Britain is keen to strengthen its ties with non-EU countries, as seen through Britain's constant endeavours to ink FTAs with countries in Asia as well as continental America. India being the fourth largest economy was given preferential treatment given its robust historical ties with London.

Analysing the road leading to this junction, the European Union came out with its Global Strategy in 2016 (EUGS), signalling its priorities, objectives, and thinking in dealing with other countries. In contrast, the UK also released its own strategic document called “Global Britain in a Competitive Age.” This Integrated Review of Security, Defence, Development and Foreign Policy recognized India as an important strategic and trade partner, whereas China was labelled as a potential threat and thus highlighted a desire to develop capabilities to counter Beijing’s growth and reduce British dependence on China. For instance, UK-China trade volume for 2024 was $132 billion USD. Therefore, this deal is of great importance to the UK.

Alongside this agreement, both countries unveiled a new strategic cooperation plan called the India-U.K. Vision 2035, replacing the earlier Roadmap 2030. It highlights a comprehensive roadmap to deepen strategic ties across trade, technology, defence, education, climate, innovation, boosting jobs, investments, clean energy, and people-to-people links, based on shared democratic values and high-level political engagement to ensure mutual growth and global leadership.

Exporters on both sides have become euphoric as this deal brings immense tariff reduction. 90% of Indian exports to Britain will now be duty-free, encompassing products like textiles, leather, marine products, gems and jewellery, auto components, chemicals, engineering goods, and even agricultural products. Likewise, India agreed to reduce duties on 90% of its tariff lines, which represents about 92% of the UK's exports to India. Furthermore, 85% of it is slated to become zero-duty within 10 years.

It also aims to bolster the rural economy as the deal covers a wide range of products like fruits, vegetables, etc. These sectors are labour-intensive and thus have high potential for employment generation. Furthermore, this provision will increase India’s agricultural exports to Britain, which is projected to rise by 20% within 3 years. Simultaneously, it protects some sensitive products like dairy as well.

The deal also aims to make professional and skilled labour mobility easier. Although it does not specify new visa categories, it guarantees access to the existing routes. Indian professionals from IT, finance, engineering, law, and consulting will get temporary work permits. It will also recognize Indian qualifications through which Indians can work with ease and secure jobs. Alongside, Britain will grant short-term business visas and long-term visas for intra-corporate transfers. These provisions will boost India’s service sector exponentially.

Another significant part is the Social Sector agreement, which exempts Indian companies from paying double social security contributions, which used to be a major point of contention for them. Now, employees only need to pay social security only to their home country instead of the aforementioned double mandate. This will significantly reduce the cost of Indian companies, impacting 36 additional sectors which will no longer require an Economic Needs Test, which was done to ensure whether a foreign investment or business is beneficial or will negatively impact the local economy.

This agreement brings an opportunity for Britain to participate in the Indian government procurement market under some conditions. British companies which meet 20% domestic sourcing will be given this chance, meaning that those companies whose products are sourced in India can participate. Sourcing involves buying raw materials from India, manufacturing or assembling or partnering with Indian companies. These companies, classified as ‘Class II’ suppliers, will also get access to a $46.28 billion USD market.

There are also strong provisions for digital trade and simplified customs procedures which intend to increase the cross-border transaction and reduce reliance on paperwork. In order to gain benefits, it has certain provisions such as:

• Businesses should digitalize their trade documentation and integrate ERP systems.

• Training customs and logistics teams to be formulated on the basis of UK-specific digital protocols and the 48-hour clearance rule.

• Ensuring compliance with data protection laws by aligning cross-border operations with India’s DPDP Act and the UK’s GDPR.

• Implementing secure data handling practices for customers’ and employees’ information shared across countries.

  
  

This FTA will not only benefit India in terms of trade or economy but also at a strategic level. Signing a free trade agreement with a western country—and that too with the UK—adds value to India’s economic image and facilitates further negotiations with the developed countries. China, with its immense grip on exports to western countries, now faces a potential challenge. According to Union Commerce and Industry Minister Piyush Goyal, this deal is a win-win for the government’s flagship initiatives like ‘Make in India’ and ‘Vocal for Local,’ as it drives job creation and strengthens India’s strategic position in global trade.

Despite these benefits, however, there remain few challenges and contentious issues. The most sensitive part is regarding the Intellectual Property Rights (IPR), primarily concerned with the pharmaceutical sector. India, known for its pharmacy and often reputed as the pharmacy of the world, producing cheap and life-saving generic medicines which are under threat by the TRIPS-plus provisions, which are more severe than the WTO’s agreement on TRIPS (Trade-Related Aspects of Intellectual Property Rights). Primarily, India does not want to compromise on the production of life-saving generic medicines on sheer principle alone.

Other challenges include exposure to the Carbon Border Adjustment Mechanism (CBAM): India’s exports in carbon-intensive sectors may face UK CBAM charges up to 35% starting in 2027. Secondly, there are some concerns around agriculture and MSMEs. Farmers and MSMEs worry about the influx of cheap British imports destabilizing the market.

British critics argue that granting Indian professionals these exemptions from national insurance—and that too for up to three years—could disadvantage local workers and cost the treasury £100–£200 million annually.

The UK’s House of Lords highlighted India’s restrictive regulatory environment. Issues like contract enforcement, IP protection, and tax complexity remain major barriers for UK investors. Despite some market access, British firms remain cautious due to India’s local sourcing thresholds and regulatory opacity in public tenders.

In conclusion, this deal is a landmark moment in the history of both the nations. It is the most significant trade deal for the UK post-Brexit and plays a pivotal role in strengthening India’s geopolitical and economic stature in the world. The future focus should be on addressing contentious issues such as intellectual property rights, etc. The outcome of these negotiations will shape India's future trade agreements, making it a matter of careful consideration and strategic decision-making.