The Union Cabinet has officially approved the free trade agreement (FTA) between India and the United Kingdom. This decision paves the way for the signing of the comprehensive economic and trade agreement in London on July 24th, during Prime Minister Narendra Modi's visit. Commerce and Industry Minister Piyush Goyal will accompany the Prime Minister.

The India-UK FTA, finalized on May 6th after extensive negotiations, is projected to significantly boost bilateral trade and economic ties. Both governments aim to double the trade between the two economies to $120 billion by 2030.

Under the agreement, tariffs on approximately 99% of exports from India to the UK will be eliminated. Key sectors expected to benefit include textiles, leather, footwear, sports goods, toys, marine products, gems and jewellery, engineering goods, auto parts and engines, and organic chemicals. India, in turn, will reduce or eliminate tariffs on 90% of its tariff lines, with 64% seeing immediate liberalization. The British food and drinks sector is also expected to gain, particularly Scotch whisky, which currently faces a 150% tariff in India. The pact has chapters covering goods, services, innovation, government procurement, and intellectual property rights.

Once signed, the FTA will require ratification by the British Parliament and approval from India's Cabinet. Implementation is expected to take about a year.

In addition to the FTA, India and the UK have concluded negotiations for a Double Contribution Convention Agreement, also known as a social security pact. This agreement aims to prevent double contributions to social security funds by Indian professionals working in the UK for a limited time. Discussions are still ongoing regarding a separate bilateral investment treaty (BIT).

Analysts view the India-UK FTA as a signal that India is becoming more open to integrating with the global economy and engaging with Western partners. However, India has had mixed results with free trade agreements in the past, sometimes experiencing trade deficits and domestic opposition due to import surges.

In 2024-25, India's exports to the UK rose by 12.6% to $14.5 billion, while imports grew by 2.3% to $8.6 billion. Some experts believe the FTA could pose challenges to the Indian automobile sector, potentially conflicting with the "Make in India" initiative, as automotive tariffs will be cut from over 100% to 10% under a tariff rate quota system.