The recently signed India-UK Free Trade Agreement (FTA) is poised to significantly boost trade and investment between the two nations, particularly in the services sector. A key feature of this agreement is the enhanced market access it provides to service providers from both countries, with India opening 108 service sub-sectors to British firms and the UK offering access to 137 sub-sectors for Indian companies.

This landmark deal, finalized after years of negotiations, is expected to increase annual bilateral trade by £25.5 billion (US$34.5 billion). The FTA aims to double trade to US$120 billion by 2030, with projections of reaching an additional US$40 billion by 2040.

Key Benefits for the Services Sector

The India-UK FTA secures unprecedented market access for Indian professionals and service providers. The services sector, a major driver of India's economy, is expected to benefit from greater access in areas like IT and IT-enabled services, financial and legal services, and professional, educational, and digital trade.

Specifically, the UK's commitments cover key areas of interest to India, including:

• IT
• Business services (management consultancy and advisory)
• Professional services (accountancy and engineering)
• Telecom
• Financial services
• Education
• Health

The UK has also made commitments in 16 sub-sectors under Independent Professionals, including computer-related services and research and development services. They have also agreed not to impose numerical restrictions or Economic Needs Test requirements for the temporary entry of natural persons into its territory.

Indian professionals, including those deployed by companies to work in the UK, as well as those on contracts such as architects, engineers, chefs, yoga instructors, and musicians, are set to benefit from simplified visa procedures and liberalized entry categories, making it easier for talent to work in the UK. The FTA provides a new edge for India's young professionals by exempting 75,000 Indian workers from UK social security payments for three years. It grants access to 36 service sectors without an Economic Needs Test for Indian firms and freelancers. Indian professionals can now work in as many as 35 UK sectors for up to 2 years, even without the need for a local office. Over 1,800 chefs, yoga experts, and musicians will be allowed to work in the UK annually, opening new doors for cultural and professional exchange.

Broader Economic Impact

The FTA is not limited to the services sector alone. It encompasses various aspects of trade, including goods, services, innovation, government procurement, and intellectual property rights.

• Tariff Reductions: Approximately 99% of India's exports to the UK will face zero import duties. Key labor-intensive sectors like textiles, marine products, and leather will benefit from the elimination of tariffs. The UK will also benefit from India's tariff cuts on aerospace, automobiles, and electrical machinery.
• Increased Market Access: The agreement improves market access for UK exporters of consumer products such as cars, cosmetics, soft drinks, and medical devices.
• Boost to Key Sectors: India's chemical exports to the UK may rise by 30–40%, potentially reaching $650–750 million in 2025–26. Gems and jewelry exports are projected to double in 2–3 years. The removal of tariffs on leather and footwear aims to drive exports past the $900 million mark.
• Government Procurement: British companies will be able to bid on non-sensitive government tenders in India valued above Rs 2 billion, potentially participating in 40,000 tenders each year, collectively worth around Rs 4.09 lakh crore.

Prime Minister Narendra Modi emphasized that the agreement would benefit India's textile, gems and jewelry sectors, and MSMEs, while helping Indians access medical devices and aircraft parts at affordable prices. The UK government anticipates that the FTA will attract nearly £6 billion in new investment and export opportunities and generate over 2,200 jobs across the country.

The India-UK FTA is viewed as a historic milestone in trade relations between the two countries. It is expected to boost wages, raise living standards, and bring down prices for consumers. Commerce and Industry Minister Piyush Goyal hailed the agreement as a game-changer for trade, investment, and services, with the potential to double India-UK trade to USD 120 billion in five years.