 "Explained: What the India-UK free trade deal means for both economies")
Prime Minister Narendra Modi’s two-day visit to the United Kingdom on July 23-24 will mark a milestone in India-UK ties, with the Free Trade Agreement (FTA) likely to be signed during his stop in London on July 24. This would be PM Modi’s fourth visit to the UK as Prime Minister and the first under the new British leadership of Prime Minister Keir Starmer.
PM Modi would also call on King Charles, and will be accompanied by Commerce and Industry Minister Piyush Goyal for the formal signing of the agreement. Following this, Modi will visit the Maldives on July 25–26, becoming the first foreign leader to do so under President Mohamed Muizzu’s administration.
What is the India-UK Free Trade Agreement?
The FTA aims to boost bilateral trade, eliminate or reduce tariffs on goods and services, and facilitate investment and collaboration between the two nations. The pact has been three years in the making, with negotiations beginning in 2022 and officially concluding on May 6.
According to Britain, the deal is its “biggest and most economically significant” bilateral agreement since exiting the European Union. Bilateral trade between India and the UK stood at £42.6 billion in 2024, and the agreement is expected to increase this by £25.5 billion annually by 2040.
Which sectors will benefit the most?
The agreement is expected to boost labour-intensive Indian exports such as:
-Leather
-Apparel and footwear
-Toys
-Marine products
-Gems and jewellery
India, in return, will reduce tariffs on a range of British goods, including:
-Whisky and gin: Tariffs will fall from 150 per cent to 75 per cent immediately, and to 40 per cent by the 10th year
-Automobiles: Duties will be lowered from over 100 per cent to 10 per cent, under a quota regime
-Medical devices, cosmetics, soft drinks, chocolates and biscuits
-Machinery and aerospace equipment
British textile tariffs will also be removed, supporting India’s large apparel industry, which employs millions.
What does the FTA mean for India?
The deal will give Indian exporters zero-duty access for 99 per cent of their products into the UK market. It is significant for sectors like engineering goods, auto components, electric vehicles, and sports goods.
The agreement includes a double contribution convention, which will exempt Indian professionals and companies from social security contributions in the UK for three years — a move described by the Indian government as a “huge win”.
The FTA also opens up opportunities for Indian businesses under Britain’s public procurement market, including in healthcare, transport, and energy sectors. Additionally, British firms investing in India could receive preferential treatment under the ‘Make in India’ policy.
India-UK trade deal: What are the exclusions?
India has excluded some agricultural goods from the agreement. This includes products like apples, dairy, and cheese, to protect local farmers and producers.
The deal also comes with phased timelines. While whisky duties will drop in stages, automotive tariff reductions will happen under a managed quota regime over time.
Why was the UK-India FTA deal stalled for so long?
The most prominent reason for the stalling of the UK-India Free Trade Agreement (FTA) negotiations was that both countries entered their general election cycles around the same time. This led to the 14th round of talks being paused as political focus in both countries shifted towards campaigns.
The proposed FTA is highly comprehensive, including 26 chapters that include goods, services, investment, and intellectual property rights. This prolonged the time required for consensus and finalising the draft. Both countries are also negotiating a separate Bilateral Investment Treaty (BIT), which may have further delayed the process.
What happens after the deal is signed?
If signed on July 24, the FTA will need to be ratified by the British Parliament and approved by India’s Union Cabinet. The implementation is expected to take up to a year from the date of signing.
Both sides are betting on this deal to double bilateral trade to $120 billion by 2030. With India’s import demand projected to rise significantly and its middle class expected to reach 60 million by 2030, the agreement could reshape the economic relationship between the two nations.