India and the United Kingdom have formally signed a landmark Free Trade Agreement (FTA) on Thursday, July 24, 2025, marking a significant step towards bolstering economic ties between the two nations. The agreement, which has been several years in the making, is projected to boost annual bilateral trade by $34 billion. For the UK, this is the biggest agreement signed since leaving the European Union in 2020.
The FTA aims to create a more open and accessible market for businesses in both countries. British Prime Minister Keir Starmer hailed the agreement as a "landmark moment," emphasizing the unique historical, familial, and cultural bonds between the UK and India. Indian Prime Minister Narendra Modi described the deal as a "blueprint for our shared prosperity". The agreement was signed by the UK's Secretary of State for Business and Trade, Jonathan Reynolds, and India's Commerce and Industry Minister, Piyush Goyal, in London.
Under the terms of the agreement, India will reduce tariffs on 90% of UK products, bringing the average levy down to 3% from the current 15%. The UK, in turn, will eliminate duties on 99% of Indian exports. This will provide Indian goods with duty-free access to the UK market, covering almost all of India's current exports to the UK. Key sectors in India, such as marine, textiles, chemicals, and base metals, will benefit from the elimination of duties, which were previously as high as 20%. Processed foods will also see significant tariff reductions, with duties as high as 70% being scrapped on 99.7% of lines. Sectors including rubber, plastics, auto, tea, coffee, and spices will also secure duty-free access.
The UK will also gain from India's tariff cuts on aerospace, automobiles, and electrical machinery, with reductions ranging from 11% to 110% down to minimal levels. Specifically, import taxes on whisky and gin will be halved from 150% to 75% initially, before falling to 40% by the tenth year of the deal. Automotive tariffs will also decrease significantly from over 100% to 10% under a quota system.
The agreement is expected to have a significant impact on various sectors in both countries. India's leather sector is projected to gain an additional market share of 5% in the UK within the next two years. Electronics and engineering exports are likely to double by 2030, while chemical exports may increase by 30-40% in the next fiscal year. Gems and jewelry exports are also expected to double in the next three years. Software services exports are estimated to increase around 20% annually once the trade pact is in effect. For the UK, the agreement is expected to increase exports to India by almost 60% over the long term.
Beyond tariff reductions, the FTA also includes provisions to promote professional mobility, strengthen regulatory cooperation, and boost cross-border investment. A social security agreement will allow Indian companies to send employees to the UK without incurring double social security contributions. The UK is India's sixth-largest investor, with total investments of around USD 36 billion. The FTA is expected to attract nearly £6 billion in new investment and export opportunities for the UK, generating over 2,200 jobs across the country.
The FTA has been welcomed by business leaders in both countries. The Confederation of British Industry (CBI) noted that the agreement sends a powerful signal that the UK is open for business and committed to free and fair trade. The British Chambers of Commerce (BCC) stated that the agreement will open a new era for businesses and boost investment between the two countries.
