For the UK, this represents its most significant bilateral trade achievement since Brexit, while for India, it marks the first major FTA with a developed Western economy.
24 Jul 2025 | 1416 Views | By Arunima Pal
The India-United Kingdom Free Trade Agreement (FTA), signed on July 24, 2025, represents an important moment in bilateral economic relations between the world's fifth and sixth-largest economies. The agreement, formally known as the Comprehensive Economic and Trade Agreement (CETA), aims to double bilateral trade from the current $60 billion to ...
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The India-United Kingdom Free Trade Agreement (FTA), signed on July 24, 2025, represents an important moment in bilateral economic relations between the world's fifth and sixth-largest economies. The agreement, formally known as the Comprehensive Economic and Trade Agreement (CETA), aims to double bilateral trade from the current $60 billion to over $100 billion by 2030, while addressing complex issues ranging from automotive tariffs to professional mobility.
The Indo-UK FTA arrives at a critical juncture in global trade, marked by rising protectionism and the reorganization of global supply chains. For the UK, this represents its most significant bilateral trade achievement since Brexit, while for India, it marks the first major FTA with a developed Western economy. The agreement's 27 chapters encompass goods, services, digital trade, intellectual property, and labor mobility, reflecting the complexity of modern trade relationships.
The negotiations, which began in January 2022, weathered political transitions in both countries before reaching conclusion in May 2025. The formal signing during Prime Minister Modi's visit to London symbolizes not just economic cooperation but also strategic alignment in the Indo-Pacific region.
The FTA establishes a comprehensive tariff elimination schedule that fundamentally reshapes market access between the two nations. According to the official document, India commits to eliminating or reducing tariffs across multiple staging categories:
The UK's commitment is even more extensive, with 99% of Indian tariff lines receiving duty-free access, covering almost 100% of trade value by volume.
The agreement adopts a calendar-year approach, with the first year running from the date of entry into force until December 31, and subsequent years following the calendar. This structured approach ensures predictability for businesses planning long-term investments and trade strategies.
The automotive provisions represent perhaps the most contentious and transformative aspects of the FTA. The document reveals a complex Tariff Rate Quota (TRQ) system with significant implications:
The EV quota structure reveals India's cautious approach to protecting its nascent electric vehicle industry:
The automotive provisions will likely create a two-speed market in India. Premium British brands like Jaguar Land Rover, Bentley, and Rolls-Royce will benefit from significant tariff reductions, making luxury vehicles more accessible to India's growing affluent class. However, the quota system protects domestic manufacturers from being overwhelmed by imports, allowing time for the Indian automotive industry to enhance competitiveness.
The exclusion of zero-emission two-wheelers, buses, and trucks from tariff concessions demonstrates India's strategic approach to protecting sectors crucial for mass mobility and commercial transport.
The treatment of alcoholic beverages, particularly Scotch whisky, has garnered significant attention:
The Scotch Whisky Association's projection of £1 billion in additional exports over five years appears realistic given the tariff trajectory. However, the Minimum Import Price mechanism ensures that only premium products benefit, protecting India's mass-market domestic spirits industry. This clever design allows India to capture revenues from luxury consumption while safeguarding employment in local distilleries.
The immediate duty-free access for 99% of Indian textile exports to the UK represents a game-changer for India's labor-intensive textile sector:
Industry estimates suggest the textile provisions could create 500,000-1,000,000 jobs in India over the next decade, particularly benefiting women workers who constitute a majority in this sector. The agreement's emphasis on labor-intensive sectors aligns with India's demographic dividend strategy.
The services provisions, particularly those relating to professional mobility, represent innovative approaches to modern trade:
These provisions acknowledge the reality of global talent flows and India's competitive advantage in services. The social security exemption alone could save Indian IT companies and their employees millions of pounds annually, enhancing the competitiveness of Indian service providers.
While specific digital trade provisions aren't detailed in the excerpted document, news reports indicate comprehensive coverage of:
These provisions position both countries to benefit from the digital economy's expansion while maintaining regulatory sovereignty.
The pharmaceutical sector provisions balance innovation incentives with access to medicines:
The agreement appears to maintain India's ability to produce generic medicines, crucial for global public health, while providing enhanced IP protection for innovative drugs.
The financial services chapter opens new opportunities:
This could accelerate India's financial sector modernization while providing UK firms access to one of the world's fastest-growing financial markets.
Based on government assessments and independent analysis:
In India:
In the UK:
The agreement's focus on labor-intensive sectors suggests significant job creation potential:
Indian consumers stand to gain from:
UK consumers benefit from:
Historical FTA utilization in India averages only 25%, compared to 70-80% in developed countries. Key barriers include:
India's past FTA experience shows imports growing faster than exports. The UK FTA includes several mechanisms to prevent this:
Certain sectors face adjustment pressures:
Despite the agreement, non-tariff barriers could limit benefits:
External factors could impact implementation:
The FTA represents several strategic achievements:
The agreement delivers on multiple strategic objectives:
Beyond economics, the FTA strengthens the strategic partnership:
Immediate Actions:
Medium-term Planning:
Long-term Strategy:
Implementation Support:
Domestic Industry Support:
Monitoring and Evaluation:
Skill Development:
Mobility Preparation:
The Indo-UK FTA sets precedents for India's future trade negotiations:
The balanced approach to goods, services, and investment provides a model for negotiations with the EU and others.
Regular review mechanisms allow for:
The FTA could catalyze:
The Indo-UK Free Trade Agreement represents a carefully balanced outcome that advances both nations' economic interests while protecting sensitive sectors. Its innovative provisions on services, digital trade, and professional mobility reflect 21st-century trade realities. While implementation challenges exist, the agreement's comprehensive nature and built-in flexibility mechanisms provide a robust framework for expanding bilateral economic engagement.
Success will depend on effective implementation, high utilization rates, and continuous adaptation to changing global conditions. For businesses, the agreement opens significant opportunities but requires strategic planning to maximize benefits. For policymakers, supporting implementation while managing adjustment costs remains crucial.
As both nations navigate an uncertain global environment, this FTA provides a stable foundation for economic partnership. Its true success will be measured not just in trade statistics but in jobs created, innovations fostered, and the strategic partnership strengthened. The agreement stands as testament to what patient negotiation can achieve and offers hope for continued global economic integration despite rising protectionist pressures.
The Indo-UK FTA is more than a trade deal—it's a strategic bet on the future of the bilateral relationship and a blueprint for modern, comprehensive economic partnerships. As implementation begins, all stakeholders must work together to ensure this historic agreement delivers on its tremendous promise.