On 6 May 2025, India and the United Kingdom concluded negotiations on a Free Trade Agreement (FTA) following a final round of talks between the UK’s Secretary of State for Business and Trade, Jonathan Reynolds, and India’s Minister of Commerce and Industry, Piyush Goyal. Thus, after over three years of negotiations, spanning 15 rounds of talks, both countries agreed to sign a trade deal which may give a new direction to their bilateral trade relations and strategic partnership. The formal signing will take at least three months, as the legal text of the deal needs to be finalised and verified.
Though it may take some more time to finalise the details of the deal, the information currently available raises serious concerns from various quarters in India. Some critics argue that Indian negotiators compromised significantly for a deal which may not be crucial for the country at this point. This explainer explores some of the critical questions regarding the concluded talks on the India-UK FTA.
What is the India-UK Free Trade Agreement?
The India-UK FTA aims to enhance bilateral trade, generate new employment opportunities, improve the standard of living and advance the overall well-being of citizens in both countries. Describing the agreement as a “historic milestone in the bilateral Comprehensive Strategic Partnership”, India argued that the deal would foster “trade, investment, innovation, and job creation in both these economies”. However, the UK called the deal its huge economic win, and claimed that it had “secured the best deal that any country has ever agreed with India”.
The Indian exports to the UK were £25.5 billion and India’s imports from the UK were £17.1 billion in 2024. Thus, the latest bilateral trade between the two countries was £42.6 billion (approximately $57 billion). The deal is expected to double the amount to $120 billion by 2030.
The FTA is projected to contribute an increase of £15.7 billion in India’s imports from the UK by 2040. The anticipated increase in India’s exports to the UK is £9.8 billion in the same period. As a result, total bilateral trade is forecasted to increase by £25.5 billion annually by 2040. According to some estimates, the deal could increase bilateral trade between India and the UK by nearly 15% annually until 2030.
What are India’s expected gains from this FTA?
India’s official statement following the final talks declared that the deal would allow nearly 99% of Indian exports to benefit from zero duty access. As exports increase, particularly from the labour-intensive sectors, there is likely to be a significant increase in employment opportunities.
India’s textile and apparel industry—one of the major labour-intensive sectors—previously struggled to compete in the UK market with products from cheaper manufacturing destinations such as Bangladesh due to a 10-12% import duty, will enjoy duty-free access under the new deal. Similarly, the leather and footwear sector, another labour-intensive sector that currently faces a tariff of up to 16%, will also receive duty-free access to the UK market.
The statement also noted that the deal would give a major boost to trade in services, creating more opportunities for Indian professionals. However, the UK has clarified that the deal will not alter its visa system or immigration strategy. It has repeatedly emphasised that “reducing net migration comes first and foremost” in its national interest.
The deal has also secured an exemption from the UK’s 15% national insurance levy for temporary Indian workers and their employers. This exemption, applicable for a period of three years under the Double Contribution Convention (DCC), is expected to give Indian service providers in the UK a competitive advantage by reducing costs.
Furthermore, the FTA would provide Indian companies with improved access to the UK’s high-income market, helping to reduce their over-dependence on other developed markets such as the US and the EU.
Finally, for Indian consumers, the deal promises more affordable access to a range of UK products, including whisky, gin, lamb, salmon, soft drinks, chocolate, biscuits, cosmetics, automotive items, medical devices, aerospace components, and electrical machinery.
What are the UK’s expected gains from the deal?
Britain expects that the deal will help to boost its economy by £4.8 billion (0.1%) annually in the long run. It estimates an approximate annual increase of £2.2 billion in workers’ wages over time. The UK would save nearly $534 million in tariffs once the deal is implemented, based on estimates from 2022 trade data. This amount could reach close to $1.2 billion by 2040. Britain anticipates that the deal would boost exports from its advanced manufacturing sectors, such as automotive, electrical circuits and high-end optical products and medical devices.
Most importantly, the UK aims to benefit from India’s growing middle class, expected to reach 60 million by 2030 and nearly half a billion by 2050. The deal would cut tariffs for nearly 90% of British products and make 85% of them tariff-free within ten years.
The FTA would cut Indian tariffs on whisky and gin from 150% to 75%, and eventually lower them to 40 % by the tenth year of the deal. The tariff on cars will fall from the current 100% to 10%, under a quota system, opening unprecedented opportunities for the UK’s luxury car brands in India. However, the most important gain for the UK is access to the $600 billion government procurement market.
Finally, the UK expects the deal to benefit consumers by offering “cheaper prices and more choice” in clothes, footwear, and food products.
Will the agreement have a negative impact on India?
The policy paper published by the UK’s Department for Business and Trade asserts that the deal will give “UK businesses unique and unprecedented access to India’s public procurement market”. By allowing UK companies to compete for approximately 40,000 tenders and granting them exclusive treatment under the ‘Make in India’ policy, the FTA undermines the current preferential access granted to those who manufacture or produce within India in its government procurement market. Moreover, UK companies will receive free access to information on published tender notices through India’s e-procurement portal.
Critics argue that New Delhi’s willingness to open up India’s strategically important procurement market for UK companies is highly problematic. They warn that unless specific clauses are included in the FTA text to protect India’s micro, small and medium enterprises (MSMEs)—which currently enjoy exclusive access to this market—the deal could severely affect the sector. Some also contend that the deal fails to offer reciprocal benefits, observing that Indian firms are largely excluded from the UK’s government procurement market.
However, some analysts argue that the opening up of central government procurement to UK firms is limited “only to non-sensitive sectors”. Therefore, they suggest, this move will improve efficiency and quality of service in sectors, like transport, health care and green energy.
Another concern raised by critics is that the FTA include no provision to shield Indian exports from the UK’s upcoming Carbon Border Adjustment Mechanism (CBAM), or carbon tax, which is scheduled for implementation in 2027. Once enforced, CBAM could affect Indian exports worth $775 million from sectors such as iron and steel, aluminium, fertiliser and cement. However, Indian officials have stated that India reserves the right to retaliate if the UK imposes a carbon tax on Indian goods.
Why did the deal take so long to finalise?
The Indian and UK governments launched negotiations for a free trade agreement in January 2022, with a target to conclude the talks by October 2022. However, prioritising quality over speed, both countries decided not to stick to the proposed deadline. By December 2023, a total of 13 rounds of negotiations had been completed, covering a broad range of areas. The 14th round, which began in January 2024, faced serious hurdles due to election cycles in both countries and was paused in May 2024.
Some observers noted that migration is a major issue delaying the conclusion of the FTA. However, Indian officials made it clear that “India has never, ever discussed immigration in any free trade agreement negotiations”. The talks resumed in February 2025 and concluded in May.
