India, UK Sign Landmark Free Trade Agreement after Years of Negotiation

India and the UK have finalized a free trade agreement, enhancing economic ties and aiming for $120 billion in trade by 2030. The deal eliminates tariffs on 99% of Indian exports, benefiting key sectors and promoting a strategic partnership across various domains including technology and defense.

Landmark India–UK FTA: Key Highlights

Strategic Partnership & Trade Goals

· Signed after 3+ years of negotiation and 14 rounds of talks.

· Aims to boost bilateral trade to $120 billion by 2030.

· Formalized in the presence of PMs Narendra Modi & Keir Starmer.

· UK’s most comprehensive post-Brexit FTA in the Indo-Pacific.

What India Gains

· Zero-duty access for 99% of Indian exports to the UK.

o Includes textiles, footwear, garments, cars, seafood, carpets, chemicals, base metals, and processed foods.

o Tariffs on processed foods (previously up to 70%) now eliminated.

· Farmers & fishermen benefit via access to UK’s agricultural & marine markets.

· Labour-intensive sectors expected to gain with job creation and export competitiveness.

· No CBAM (carbon tax) included yet — future discussions planned.

UK Gains

· India will reduce duties on UK’s luxury items like Scotch whisky and premium cars.

· Tariffs on Scotch whisky to be cut from 150% to 75%, with 5% annual reductions.

· UK exports of medical devices & aerospace parts to become more affordable in India.

People Mobility & Social Security

· Up to 1,800 Indian professionals (chefs, yoga instructors, musicians) can provide services in the UK.

· New social security pact exempts contributions for Indian workers in UK for 3 years — benefitting ~75,000 individuals.

Broader Vision

· 'Vision 2035' to deepen partnership across tech, defense, climate, education, and citizen-to-citizen exchanges.

· India–UK ties envisioned as innovation-led, inclusive, and sustainable.

[ABS News Service/25.07.2025]

New Delhi: India and the United Kingdom on Thursday signed a landmark free trade agreement, ending years of protracted negotiations and marking a new phase in their economic partnership. The deal will give a major push to bilateral trade and investment, offering greater market access across key sectors.

This is the most comprehensive FTA signed by the UK in the Indo-Pacific region post-Brexit, and adds to India’s growing portfolio of bilateral trade agreements, including those with Australia and the UAE.

The agreement, aimed at boosting goods and services trade between the two countries, was signed by commerce minister Piyush Goyal and his British counterpart Jonathan Reynolds in the presence of Prime Minister Narendra Modi and British prime minister Keir Starmer.

TheIndia-UK FTA promises to unlock major economic gains for India by eliminating tariffs on 99% of Indian exports, covering nearly 100% of the trade value.

Indian businesses will benefit from zero-duty access to the UK, including for exports of textiles, footwear, carpets, cars, and marine products, which currently face tariffs of 4-16%. The UK will see tariff reductions in India on luxury items such as Scotch whisky and premium cars.

“Indian textiles, footwear, gems and jewellery, seafood, and engineering goods will gain better market access in the UK. New opportunities will also open up for India’s agricultural produce and processed food industry in the British market,” Modi said, announcing the deal.

“This agreement will be especially beneficial for India’s youth, farmers, fishermen, and the MSME sector,” Modi added. “At the same time, products made in the UK—such as medical devices and aerospace parts—will become more accessible and affordable for Indian consumers and industry.”

The India-UK FTA does not include the Carbon Border Adjustment Mechanism (CBAM) —the so-called carbon tax—at this stage, but both sides said it will be taken up for discussions later.

Modi said India and the UK would also discuss a ‘Vision 2035’ programme as part of a comprehensive strategic partnership between the two countries over the next decade.

“This will serve as a roadmap for a strong, trusted, and ambitious partnership across technology, defence, climate, education, and people-to-people connections,” he said.

A $120 billion target

India and the UK had concluded negotiations for the free trade agreement on 6 May after more than two years of talks.

The FTA—formally known as the Comprehensive Economic and Trade Agreement—seeks to increase bilateral trade to $120 billion by 2030 by eliminating or significantly reducing customs duties on a wide range of products.

India’s merchandise exports to the UK rose 12.6% to $14.5 billion in 2024-25, while imports grew marginally by 2.3% to $8.6 billion. Total bilateral trade stood at $21.34 billion in 2023-24, up from $20.36 billion in the previous year.

The FTA—comprising 27 chapters, including on services, innovation, government procurement, intellectual property rights, and anti-corruption—will come into effect after it is ratified by the UK Parliament, which may take another six months.

It also marks India’s first major bilateral trade agreement with a developed Western economy since the Modi government accelerated its FTA agenda, part of a wider strategy to diversify export markets and attract investments.

Separately, India and the UK have concluded negotiations on a social security agreement called the Double Contribution Convention. Under this, Indian workers and employers in the UK will be exempt from social security contributions for three years, a move expected to benefit around 75,000 Indian workers.

The pact also improves mobility for Indian professionals, allowing up to 1,800 chefs, yoga instructors, and classical musicians to temporarily provide services in the UK.

Major gains for key sectors

India’s commerce ministry said on Thursday the India-UK FTA would grant Indian farmers preferential access to the UK’s $37.5 billion agricultural market, while protecting sensitive Indian sectors such as dairy, vegetables, apples, cooking oils, and oats.

The ministry also said a major breakthrough had been secured for Indian fishermen, as the UK’s import duties on marine products—currently as high as 20%—will fall to zero, opening up a $5.4 billion market.

Labour-intensive sectors are expected to see a boost in job creation, with Indian exports gaining a competitive edge in the UK, the ministry added in the statement. Textiles and clothing, chemicals, and base metals will now face zero duty, down from tariffs of up to 12%, 8%, and 10%, respectively, it said.

The agreement also brings significant gains for rural India and processed food exporters, with zero duty on processed foods, which previously attracted tariffs of up to 70%, the ministry said.

A modern blueprint

Dr. Anish Shah,group chief executive and managing director, Mahindra Group, said the India-UK FTA is not just a win for trade, but a blueprint for a modern, values-led partnership that puts innovation, sustainability, and inclusive growth at the heart of global collaboration.

On the proposed cut in customs duty on Scotch whisky—from 150% to 75% upfront, followed by a 5% annual reduction—liquor industry expert Vinod Giri said this may boost margins for producers but is unlikely to significantly alter the Indian whisky market.

“Consumer prices for imported Scotch are not expected to drop meaningfully as the bulk of alcohol taxes lie with states,” he said. “Even if the full duty cut is passed on, it would reduce prices by only ₹100-300 per bottle—too small to attract new buyers.”

Sudhir Sekhri, chairman of the Apparel Export Promotion Council, said the India-UK FTA will “usher in a new era of garment trade” with the UK. “This agreement will enhance market access, spur investment and job creation in the garment sector, besides creating new opportunities for businesses and consumers on both sides,” he said.

The UK is the world’s fifth largest garment importer. The country imported garments worth $19.7 billion in 2024. That year, India exported $1.2 billion worth of garments to the UK, emerging as one among the country’s top four suppliers.

Tufan Erginbilgic, chief executive officer of Rolls-Royce Plc., said the India-UK free trade agreement would unlock benefits such as job creation, technology development, and manufacturing growth. “Rolls-Royce is growing its aerospace capabilities in India, and we look forward to working with Indian partners to co-develop power and propulsion technologies for India and the world,” he said.

India-UK FTA negotiations—a timeline

The India-UK FTA was finalised after an extensive series of 14 negotiation rounds spanning over three years.

January 2022: Talks for the India-UK FTA begin, seven months after prime ministers Narendra Modi and Boris Johnson announced the Enhanced Trade Partnership between the two countries. The first round was held virtually in January 2022, followed by alternating meetings in London and New Delhi through the year.

2023 and 2024: Despite initial optimism to conclude the deal by Diwali 2022, political developments in the UK—most notably the resignation of Prime Minister Liz Truss—led to delays. Negotiations continued steadily through 2023 and 2024, with both sides engaging in detailed discussions to resolve key issues related to tariffs, services, investment, and market access.

January-March 2024: Negotiations held during this period helped bridge several remaining gaps in the India-UK free trade agreement. This round—the 14th and final—continued through a change in leadership in the UK, with Keir Starmer assuming office as UK prime minister on 5 July 2024.

February 2025: After a wait of over seven months, the UK announced resumption of FTA talks.

6 May: India and the UK formally announced the conclusion of negotiations.

24 July: India and the UK formally signed the landmark free trade agreement.