UK firms are eagerly pursuing contracts in India, with an estimated $38 billion in opportunities now accessible through Indian procurement contracts. The recently signed Free Trade Agreement (FTA) between the UK and India is expected to strengthen economic ties, boost trade, and create new investment opportunities for both nations. However, despite the optimism surrounding the FTA, several challenges loom for UK firms looking to expand their operations in India.
The FTA is projected to increase the UK's GDP by 0.13%, equivalent to £4.8 billion. It is also expected to boost UK exports to India by 60% (£15.7 billion) and increase Indian imports to the UK by 25% (£9.8 billion) in the long run. The agreement aims to dismantle trade barriers through tariff reductions, benefiting consumers in both countries. For UK consumers, this means the prospect of cheaper clothes, shoes, food and jewelry. India stands to benefit from lower tariffs on UK goods like whisky, medical devices, cosmetics, biscuits, and luxury cars. The UK government has also announced that the trade agreement with India has secured over £6 billion in new investment and export deals, supporting more than 2,200 British jobs across the country. British workers are projected to gain a collective £2.2 billion wage uplift annually, with potential savings for a wide range of everyday goods.
Several British companies have already announced deals in India. Airbus and Rolls-Royce are delivering aircraft as part of contracts worth around £5 billion, supporting jobs in Filton, Broughton, and Derby. Zerowatt Energy, an AI-powered energy firm, will open a new global HQ in Leicester, investing £10 million and creating 50 jobs across multiple UK locations. Carbon Clean, a UK-based leader in carbon capture, has invested £7.6 million in a Global Innovation Centre in Mumbai, with projected UK export contributions of £83 million over the next five years.
The FTA will reduce tariffs on 90% of British products exported to India, with 85% becoming tariff-free within a decade. This includes significant tariff reductions on alcohol and cars. India has agreed to either eliminate or reduce duties on 90% of its tariff lines, comprising about 92% of what the UK exports. The average tariff on UK goods will fall from 15% to 3%, making it easier for UK exporters of various products.
However, challenges remain for UK firms. The high cost of doing business in the UK, including property rents and operational costs, along with demanding compliance and regulatory environment, can pose challenges for international companies. Complexities of the UK's immigration system further compound these issues. Infrastructure concerns and foreign exchange controls in India also remain significant barriers.
One notable omission from the FTA is the inclusion of legal services. Despite lobbying efforts, the agreement does not address market access for lawyers in either India or the UK. India's legal sector remains one of the most restrictive of any major market economy. The Bar Council guidelines create immediate operational challenges, with high registration costs and compliance requirements discouraging international firms from deploying lawyers in India.
Despite these challenges, the FTA is expected to create new opportunities in various sectors, including transport, travel, creative, and business support, alongside traditional strengths in finance and professional services. The agreement also lays the groundwork for closer cooperation in technology and innovation, with potential for joint research, pilot projects, and co-development in transformative technologies. This can help universities, research institutes, and professional bodies collaborate on projects that equip future professionals with the right tools to lead in a green, digital economy.
