India and the United Kingdom have successfully concluded a landmark Free Trade Agreement (FTA), setting the stage for deeper economic ties and enhanced market access between the two nations.
Under this historic pact, both countries will benefit from liberalized market access and reduced trade restrictions. This deal represents the UK’s most significant post-Brexit trade agreement and is India’s first major FTA beyond Asia and Australia.
According to the IMF’s World Economic Outlook (April 2025), India is now the world’s fourth-largest economy, while the UK ranks sixth. This agreement is expected to provide a considerable boost to bilateral trade and investment between the two economies.
Trade targets and negotiation background
Bilateral trade between India and the UK rose to $21.34 billion in FY24, up from $20.36 billion in FY23. The newly signed FTA aims to further expand trade volumes by an additional £25.5 billion (approximately $34 billion) by 2040.
The agreement follows more than three years of intensive negotiations, including 14 formal rounds of discussions. Talks gained traction amid global tariff uncertainties sparked during former U.S. President Donald Trump’s tenure, which saw both India and the UK seek alternative trade alignments.
Significantly, India has agreed to expand market access for UK firms, especially in the automobile sector, a move that reflects New Delhi’s evolving trade policy. India is concurrently engaged in trade negotiations with the European Union, suggesting a broader liberalization trend.
Key features of the agreement
The FTA covers 26 chapters, including goods, services, investments, and intellectual property rights. Among the standout features:
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Tariff cuts on 90% of UK imports into India, with 85% becoming tariff-free over the next decade
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50% reduction in duties on scotch whisky and gin
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Tariff cap of 10% on UK car exports under a quota system
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Indian textile and footwear exports to benefit from reduced UK duties
Sectors and industries to watch
The sectors poised to benefit most from this agreement include:
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Food processing and beverages: Lower import tariffs on chocolates, biscuits, lamb, and salmon
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Alcoholic beverages: Notably scotch whisky and gin
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Automobiles and advanced manufacturing parts
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Labour-intensive exports from India such as textiles and footwear
What this means for the markets
Investors and market participants can expect heightened activity in listed companies within these sectors, both in India and the UK. Indian stocks in textiles, food processing, and auto components may particularly benefit from enhanced export opportunities, while UK firms in liquor and car manufacturing gain improved access to the Indian consumer base.
This landmark FTA marks a new era in India-UK economic collaboration, reinforcing their Comprehensive Strategic Partnership and paving the way for stronger trade, innovation, and job creation across both nations.
