India-UK Free Trade Agreement

Introduction-: India and UK on 24 July 2025 signed on Comprehensive Economic and Trade Agreement (CETA) under the leadership of Indian PM Narendra Modi and British PM Sir Keir Starmer in the recent visit of PM Modi to Britain.

Both the countries agree on Free Trade Agreement (FTA).

Measure points of Agreement -:

1. The agreement provides export opportunities for labour-intensive sectors including textiles, leather, footwear, gems and jewellery, marine products, and toys.
2. 99 % of goods exported from India will get tax-free entry into the UK market.
3. The agreement provides improved market access in IT and IT-enabled services, financial and legal services, professional and educational services, and digital trade.
4. Double Contribution Convention Agreement (Social Security Agreement)– It will ensure that professional in either country will not be forced to pay ‘National Insurance or social security contribution’ in both the countries.
5. India has agreed to reduce or eliminate duties on almost 90 % of British products, while Britain will give duty-free market access to almost 99 % of Indian exporters.
6. India’s labour sectors such as textiles, footwear, gems and jewellery, chemicals, auto components and engineering goods will get reduced duty access in British market.

Effects on Various Sectors-:

(1) Agriculture – Exports of Basmati rice, Alphonso mangoes, fishery products are expected to double in 3 years.

(2) Textiles – Earlier, there was a 12% tax on textile products which has now been reduced to 0%, which will make Indian products competitive in the British market.

(3) MSMEs – Promotion of MSMEs in India like Diamond jewellery, leather industries etc in British market as MSMEs contributes to 40% of India’s GDP.

(4) UK companies investing in IT, green technology in India will increase which will strengthen India’s manufacturing sector.

Benefits to India-:

1. India’s GDP to be increased by 0.06%, equivalent to 5.1 billion pounds per year.
2. Indian industries can access to medical devices, aerospace etc parts of UK at cheaper cost.
3. Tariff on luxury and EV cars will be reduced from 110% to 10% making them cheaper in Indian market.
4. Indian professionals will now be able to work in 35 sectors of UK for almost 2 years without office in country.
5. Indian professionals like IT, Healthcare etc. will be exempted from UK social security payments for 3 years.
6. This agreement is expected to increase bilateral trade by 25.5 billion pounds.
7. India’s annual exports to be increased by $5 billion which will create over 10 lakhs jobs within five years.
8. India will reduce the duty on Scotch and whisky from 150 per cent to 30 per cent which will improve access for British spirits to the Indian market benefiting the hospitality sector and consumers due to lower prices.

Benefits to UK -:

1. UK businesses will get access to public procurement opportunities in India.
2. British people will have diversity in clothes, shoes, and food products at cheaper cost.
3. The UK’s GDP is estimated to increase by 0.13%, equivalent to 4.8 billion pounds.

Challenges for India-:

(1) Competition for India’s domestic industries will increase.

(2) Luxury cars like Jaguar and Land Rover will be available in India at a lower price, which is likely to hurt India’s domestic automobile companies.

(3) Carbon border tax’ imposed by Britain may negatively impact the Indian metal industry.

(4) Trade deficit may increase as the previous free trade agreements have seen an 82% increase in imports while exports have only increased by 31%.

Conclusion-:

This FTA will ensure the surge in bilateral trade, investment participation, market access and long-term benefits although challenges like non-tariff barriers, quota system and negative list loom large but visionary and strategic approach can make agreement more effective.

Source- Economics times, PIB, UK Government website, Indian Express, The Hindu