Prime Minister Narendra Modi's recent visit to the UK culminated in the signing of a landmark Free Trade Agreement (FTA) between India and the UK, a deal that has been nearly three years in the making. This agreement, signed on Thursday, July 24, 2025, is expected to significantly boost business between the two countries by reducing or eliminating taxes and tariffs on a wide range of products and services. For India, this is its first major trade deal with a developed nation in over a decade, while the UK considers it their most significant deal since Brexit.

What's in it for India?

The FTA promises substantial gains for India, most notably through duty-free access to UK markets for a significant portion of Indian exports. Specifically, the agreement guarantees that 99% of exports from India will have duty-free entry into British markets. This elimination of tariffs opens up new avenues for Indian businesses, particularly in labor-intensive industries such as textiles, leather goods, footwear manufacturing, toy production, and seafood products. Other sectors poised to benefit include gems and jewelry, engineering products, automotive components, and organic chemical manufacturing.

The agreement is expected to create numerous job opportunities across India, as it stimulates exports in these key sectors. The processed food industry also stands to gain, with duties on 99.7% of items completely removed from their earlier levels.

Beyond goods, the FTA also addresses the movement of professionals. Indian chefs, yoga instructors, musicians, and other professionals will now have temporary access to work in the UK under a short-term entry scheme. Furthermore, a new social security exemption will allow Indian professionals to skip UK social security contributions for up to three years, resulting in savings for both workers and companies.

Specific Benefits and Impact

• Duty-Free Access: 99% of Indian exports will have duty-free entry into the UK market.
• Job Creation: The FTA will substantially boost job opportunities across India, especially in labor-intensive sectors.
• Reduced Tariffs on UK Goods: British products like automobiles, healthcare equipment, soft drinks, and beauty items will become more accessible to Indian buyers, with average duty rates decreasing from 15% to 3%. Tariffs imposed on whisky and gin imports will decrease from 150% to 75% in the first phase, and further down to 40% over ten years.
• Increased Trade Volume: Trade between the two countries stood at 42.6 billion in 2024. With the FTA in place, that number is expected to increase significantly. The FTA aims to double trade to $120 billion by 2030. By 2040, both countries hope to increase trade by another $40 billion.
• Boost to Key Sectors: The India-U.K. CETA agreement is expected to boost exports in agriculture, textiles, leather, chemicals, and engineering goods, benefiting both countries. The gems and jewellery exports are expected to surge to $2.5 billion within the next three years.

What's in it for the UK?

The UK will also benefit from the agreement through reduced tariffs on several of its key exports to India. This includes Scotch whisky and gin, with duties set to drop significantly. Tariffs on British cars will also fall substantially under a special quota system. Cosmetics, chocolates, biscuits, medical devices, salmon, and machinery will also see reduced duties. British companies will also be allowed to bid for certain large-scale Indian government projects, particularly in transport, healthcare, and energy. 90% of UK exports to India will become cheaper, with 85% becoming fully duty-free over the next ten years. UK firms gain easier access to India's telecom, banking, and insurance sectors.

Overall Impact

The India-UK FTA is expected to have a wide-ranging positive impact on both economies. It is projected to increase bilateral trade by nearly $34 billion annually. The agreement will not only boost trade in goods but also enhance cooperation in services, investment, and technology. By reducing barriers to trade and investment, the FTA will create new opportunities for businesses and consumers in both countries, leading to increased economic growth and prosperity.