Against a backdrop of global economic uncertainties, the UK and India are set to sign a landmark Free Trade Agreement (FTA) on July 24, 2025, a move hailed as defying expectations and a testament to persistent diplomacy. Prime Minister Narendra Modi is in London to sign the pact with his British counterpart, Keir Starmer. This comprehensive economic and trade agreement, the result of nearly three years of negotiations, aims to significantly boost jobs, exports, and overall economic growth for both nations.
The FTA is particularly significant for the UK, representing its biggest and most economically impactful bilateral trade deal since leaving the European Union. For India, it marks a major trade agreement with a developed economy in over a decade. The agreement is projected to increase bilateral trade by £25.5 billion in the long run, delivering economic growth and supporting jobs across both nations. The UK government estimates that the deal could add £4.8 billion to the UK economy and £2.2 billion in wages every year.
Under the terms of the agreement, 99% of Indian exports will benefit from zero duty in the UK market. This will provide a significant boost to Indian labor-intensive sectors such as textiles, leather, footwear, sports goods, and gems and jewellery. Similarly, the agreement will reduce tariffs on approximately 90% of UK goods exported to India. Tariffs on British whisky and gin will be reduced from 150% to 75% immediately, with a further reduction to 40% over the next ten years. Automotive tariffs will also be reduced from over 100% to 10% under a quota system. Other UK goods that will see reduced import duties include cosmetics, medical devices, salmon, electrical machinery, and chocolate.
The FTA also includes provisions to ease the mobility of professionals between the two countries. This will benefit contractual service suppliers, business visitors, investors, intra-corporate transferees, and independent professionals such as yoga instructors and chefs. Furthermore, the agreement includes a Double Contribution Convention Agreement, which will help avoid double social security contributions for Indian professionals working in Britain for a limited period.
While the FTA is expected to bring significant benefits to both countries, some challenges and concerns remain. One key issue is the UK's Carbon Border Adjustment Mechanism (CBAM), also known as a carbon tax, which could potentially impact Indian exports. The FTA does not directly address CBAM or exempt India, which could lead to trade imbalances. Another concern is the slow progress of the Bilateral Investment Treaty (BIT) between the two countries, with unresolved issues such as dispute resolution and investment protection potentially affecting investor confidence. Some industries have also expressed disappointment, seeking a level playing field. For example, Indian drinks makers are concerned that the deal could open the floodgates for cheaper Scotch whisky brands.
Despite these challenges, the UK-India FTA is a significant achievement that reflects a commitment to strengthening bilateral relations and promoting economic growth. The agreement is expected to create new opportunities for businesses and consumers in both countries, while also addressing important issues such as professional mobility and social security. Once signed, the agreement will require approval from the British Parliament before it can take effect. This process may take about a year.
The India-UK FTA sends a message to the world that, even in times of economic uncertainty and political volatility, mutually beneficial trade agreements can be achieved through patient diplomacy and a focus on long-term strategic interests.
