On July 24, 2025, India and the United Kingdom signed a landmark Free Trade Agreement (FTA) during Prime Minister Narendra Modi's visit to London. This agreement marks India's first major bilateral trade deal with a developed economy in over a decade. The FTA is expected to significantly improve market access and boost bilateral trade by approximately $34 billion annually.

Key Highlights of the India-UK FTA:

• Trade Boost: The FTA aims to double trade between India and the UK to $120 billion by 2030, with hopes to increase it by another $40 billion by 2040.
• Tariff Reductions: India will reduce the average import tax on goods from the UK from 15% to just 3%. The UK will eliminate import taxes on approximately 99% of tariff lines, covering nearly 100% of the trade value.
• Market Access: The agreement ensures comprehensive market access for goods across all sectors, covering all of India's export interests. Indian products like footwear, textiles, and leather will gain better access to the UK market compared to countries like Bangladesh, Pakistan, and Cambodia.

• Benefits for Key Sectors:

  • Textiles and Apparel: Current UK tariffs of 8-16% will be eliminated, benefiting textile hubs like Tiruppur, Surat, and Ludhiana.
  • Footwear: Zero-duty access will benefit manufacturers in Agra, Kanpur, and Chennai.
  • Leather: Indian leather and footwear exports will no longer face the 16% duty; it will now be zero.
  • Agriculture: Expanded market access for Indian farmers to export high-value products such as fruits, vegetables, basmati rice, cereals, animal products, beverages, oilseeds, and dairy.
  • UK Gains: The UK will reduce tariffs on products such as whisky, gin, soft drinks, cosmetics, lamb, and other farm goods. Import duties on Scotch whisky and gin will drop from 150% to 75% immediately and to 40% over the next 10 years.
  • Automotive: India will allow some UK cars in at just 10% duty, a significant drop from over 100%.
  • Services Sector: UK firms gain easier access to India's telecom, banking, and insurance sectors. The deal will help integrate the advanced services sector between the two nations. The FTA is expected to create opportunities in IT, financial services, professional services, and education services.
  • Social Security Relief: Indian professionals on temporary assignments in the UK will be exempt from paying social security contributions for up to three years, with estimated annual savings of ₹4,000 crore.
  • Government Procurement: UK companies can bid on Indian federal government tenders worth over ₹200 crore in non-sensitive sectors, opening access to around ₹4.09 lakh crore in annual tenders.

UK-India Vision 2035:

Alongside the FTA, Prime Ministers Modi and Starmer unveiled the "UK-India Vision 2035," an ambitious agreement to elevate the partnership to new heights over the next decade. This vision builds upon the FTA and aims to create more opportunities, particularly in defence and technology.

Economic Impact:

The UK government estimates that the FTA will increase its GDP by £4.8 billion annually. Indian exports to the UK are expected to double by 2030. The British government stated the FTA will significantly improve market access and boost bilateral trade by around $34 billion annually. The deal is projected to unlock thousands of jobs and boost growth across both economies. The FTA will reduce India's average tariff on UK products from 15% to 3%, making it easier for British companies to sell to the Indian market.

Political Context:

The India-UK deal is significant as it is the most comprehensive free trade agreement India has entered into so far. Negotiations for the FTA spanned three years and were finalized after Keir Starmer's Labour Party won a decisive victory in May 2025.

Other Discussion Points:

During PM Modi's visit, discussions also covered technology, investment, climate, defence, trade, and migration. PM Modi is also expected to have raised concerns about Khalistani extremists in the UK and pushed for the extradition of Vijay Mallya, Lalit Modi, and Nirav Modi.