The year 2025 witnessed a significant leap in India-UK relations with the finalization of a landmark Free Trade Agreement (FTA) in July. This historic deal, officially termed the Comprehensive Economic and Trade Agreement (CETA), marks a pivotal moment for both nations, setting the stage for stronger economic and strategic partnerships.
Negotiations for the FTA, which began in January 2022, concluded on May 6, 2025, after intense discussions. Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer officially announced the agreement. The signing ceremony took place in London on July 24, 2025, during Prime Minister Modi's visit.
The India-UK FTA is expected to boost bilateral trade significantly. The UK government estimates an increase of £25.5 billion annually. Some forecasts suggest the agreement could increase trade volumes between the two countries by £25-34 billion annually by 2040. The agreement is projected to increase the UK's GDP by £4.8 billion (0.13%) each year in the long term, with UK wages growing by an estimated £2.2 billion annually.
Under the terms of the FTA, the UK will offer duty-free access to 99% of Indian goods. India's average tariffs on UK products will decrease from 15% to 3%. Tariffs on whisky will be reduced from 150% to 75% upon the agreement's enforcement, with a further reduction to 40% over the next ten years. For automobiles, India will cut tariffs to 10% (under quota) from the current rate of up to 110%. Sensitive sectors, including sugar, milled rice, pork, chicken, and eggs, will remain protected from liberalization.
The FTA extends beyond trade in goods, encompassing services, investment, and digital trade. It aims to streamline customs procedures, enhance mobility, and create new opportunities in government procurement and digital trade. The agreement also includes provisions for protecting investments, ensuring regulatory transparency, and facilitating arbitration.
Several sectors in both countries are poised to benefit from the FTA. Indian exporters in textiles, marine products, auto components, and gems and jewelry are expected to gain from zero-duty access to the UK market. The gems and jewelry sector could see exports reach $2.5 billion within two years, nearly doubling total trade in this segment to approximately $7 billion. The agreement also supports India's skilled workforce by expanding opportunities in IT, finance, consulting, and education. The UK anticipates market access wins for advanced manufacturing, medical technology, and clean energy companies.
The India-UK FTA is seen as a crucial step in India's trade diplomacy, diversifying market access and signaling geopolitical realignment. It is the UK's largest negotiated deal since Brexit and India's biggest agreement with a G7 economy in over a decade. The FTA is a cornerstone of India-UK collaboration under the framework of the 2030 Roadmap, which aims to strengthen the relationship through mutual economic growth, technological innovation, and collaboration on global challenges, including climate change.
