New Delhi(ABC Live): India-UK Free Trade Agreement: India and the United Kingdom signed a landmark Free Trade Agreement (FTA) on 24 July 2025 under the leadership of Prime Minister Narendra Modi and UK Prime Minister Keir Starmer. This agreement marks India’s first full-scale FTA with a G7 country, cementing a new era of bilateral economic
New Delhi(ABC Live): India-UK Free Trade Agreement: India and the United Kingdom signed a landmark Free Trade Agreement (FTA) on 24 July 2025 under the leadership of Prime Minister Narendra Modi and UK Prime Minister Keir Starmer. This agreement marks India’s first full-scale FTA with a G7 country, cementing a new era of bilateral economic cooperation.
As India pushes to become a global manufacturing hub under its Atmanirbhar Bharat mission, and the UK seeks new economic alliances post-Brexit, the India–UK FTA is seen as a strategic trade milestone. The deal offers duty-free access for 99% of Indian exports and opens up mobility, services, and digital trade—especially for India’s MSMEs.
In this critical review, ABC Live analyses the scope, benefits, and risks of the India–UK FTA, with a special focus on MSME readiness, sectoral impact, and political dynamics.
What Is a Free Trade Agreement?
A Free Trade Agreement (FTA) is a treaty between two or more countries that aims to reduce tariffs, ease trade barriers, and promote investment and services. FTAs improve:
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Market access for exporters and service providers
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Cross-border investment flows
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Customs and regulatory cooperation
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Digital trade and e-commerce frameworks
India has previously signed FTAs with ASEAN, Japan, the UAE, and Australia. The India–UK FTA, however, is one of its most ambitious and wide-ranging.
India–UK FTA: Key Highlights
| Feature | Details |
|---|---|
| Date Signed | 24 July 2025 |
| Expected Implementation | Late 2025 or early 2026 |
| Coverage | Goods, services, digital trade, investment, IPR, labour mobility, sustainability |
| Indian Exports (Duty-Free Access) | 99% |
| Tariff Reductions (UK Goods) | From 15.6% to 3.2% |
| Tariff Reductions (Indian Goods) | From 11.2% to 0.2% |
The official UK government FTA impact report confirms that the agreement will boost GDP, create jobs, and double trade volumes.
Trade and Investment Data
Pre-FTA (2023–24)
| Trade Metric | India to the UK | UK to India |
|---|---|---|
| Merchandise Exports | $11.4 billion | $9.8 billion |
| Services Exports | $8.5 billion | $5.6 billion |
| UK FDI into India | $1.6 billion | — |
Post-FTA Projections (2030)
| Impact Area | India | UK |
|---|---|---|
| GDP Growth | ?5,100 crore/year | £4.8 billion/year |
| Export Growth | +35–40% in key sectors | +60% in spirits, auto, beauty |
| Jobs Created | ~1 million (MSMEs/logistics) | ~200,000 (professional) |
| Target Bilateral Trade | $100 billion | £50 billion |
Sectoral Winners: India and the UK
| Sector | India Gains | UK Gains |
|---|---|---|
| Textiles & Garments | 12% tariff removed | — |
| Gems & Jewellery | 10% tariff removed | — |
| Pharmaceuticals | Faster UK market access | — |
| Whisky & Liquor | — | Tariffs halved (150% ? 75%) |
| Auto Components | Export boost to UK | Quota-based access to India |
| IT & Digital Services | Mobility for Indian professionals | Access to Indian digital market |
MSME Impact of the India–UK FTA
While the FTA opens new markets for Indian MSMEs, it also presents challenges:
? Benefits
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Duty-free UK access for MSME-rich sectors like textiles, pharma, and gems
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Mobility for professionals and IT consultants for up to 2 years
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Legal advisory, trade consulting, and e-commerce export opportunities
?? Risks
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68% of MSMEs are unaware of UK standards and documentation requirements (FIEO survey)
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Influx of UK goods may disrupt sectors like dairy, cosmetics, and electronics
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Indian MSMEs lack scale and institutional support to leverage FTA benefits immediately
To maximise gains, India must launch FTA training, compliance support, and MSME export facilitation programs.
Political Context and Strategic Significance
Negotiation Timeline
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15 rounds from Jan 2022 to July 2025
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Final breakthrough post Modi’s 2024 re-election and Starmer’s 2025 victory
Key Diplomatic Outcomes
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India rejected the UK’s push for Investor-State Dispute Mechanisms
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Secured social security waivers for Indian workers posted to the UK (save ~$6,000/yr)
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Achieved limited mobility rights for Indian professionals in 35 service sectors
Read more on India’s FTA strategy via the Ministry of Commerce.
Final Verdict: India–UK FTA
| Category | Strengths | Limitations |
|---|---|---|
| Exports | Strong gains for Indian goods | Uneven across MSME sectors |
| Services | Better mobility for Indian professionals | No access to UK legal markets |
| Digital Trade | Recognition of e-contracts and cooperation | No clarity on data transfer or AI standards |
| Investment | Indian sovereignty retained | BIT and carbon tariff talks are pending |
Conclusion
The India–UK FTA is a major diplomatic and economic milestone. It offers strong commercial opportunities—especially for Indian MSMEs, IT exporters, and traditional sectors—but also demands a significant push in institutional support and policy execution.
India must now focus on:
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? MSME readiness and compliance training
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? Finalising the Bilateral Investment Treaty (BIT)
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? Strengthening digital infrastructure and customs cooperation
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? Creating safety nets for vulnerable MSME sectors
The India–UK FTA is high-potential. Turning it into a high-impact agreement depends on India’s ability to build trade capacity from the ground up.
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