India–UK FTA could expand trade by 15%

Shrankhla Verma | May 21, 2025

In May 2025, India and the UK signed a Free Trade Agreement eliminating tariffs on 99% of Indian exports and 90% of UK imports. With projected trade growth of 15% annually, the deal opens major opportunities for sectors like textiles, engineering, and luxury goods—offering a competitive edge for Indian exporters and better choices for consumers.

India and the United Kingdom formalised a long-anticipated Free Trade Agreement (FTA) in May 2025, aimed at strengthening their economic ties and enhancing bilateral trade across several key sectors. This agreement, concluded after nearly three years of negotiations, is expected to increase annual trade between the two countries by around 15%, according to CareEdge Ratings.

The deal eliminates tariffs on 99% of Indian exports to the UK and 90% of UK exports to India. Sectors likely to benefit include textiles, engineering goods, gems and jewellery, as well as UK exports such as Scotch whisky, luxury cars, and medical equipment.

D Naveen Kumar, Associate Director at CareEdge Ratings, noted that the agreement would boost the global competitiveness of Indian exporters while offering Indian consumers better product choices at improved prices. The FTA also promotes investments, joint ventures, and collaboration in the services sector, further deepening economic relations.

Currently, trade between India and the UK represents only about 2% of India’s total global trade, suggesting significant room for growth. Despite consistent upward momentum at a 10–12% compound annual growth rate (CAGR), past disruptions from COVID-19 and Brexit had impacted trade volumes in 2020 and 2021.

Now, with the FTA in place and full implementation expected within a year, ICRA projects Indian exports to the UK could reach approximately GBP 45 billion, while imports from the UK could grow to GBP 30 billion by 2030.

For Indian exporters, the benefits include enhanced market access, improved competitiveness, and a simplified trade environment. Tariffs that currently range from 4% to 18% on Indian goods entering the UK will largely be removed, offering a major advantage to Indian firms seeking to expand in the British market.

From the import perspective, Indian buyers and industries stand to gain from lower tariffs on UK exports. Sectors such as automobiles, alcoholic beverages, industrial machinery, and pharmaceuticals will benefit the most. For example, the import duty on Scotch whisky—previously up to 150%—is being halved and will gradually fall to 40%. Luxury cars from the UK will see duties cut from 100% to 10%, enhancing affordability and market access. Similarly, UK exports of medical devices and green technologies are expected to increase due to lower duties and simpler regulations.

These changes will provide Indian consumers with greater access to high-quality goods and could help local industries modernise, especially under the government’s ‘Make in India’ initiative. The deal may also support more collaboration in education and professional services, bolstering India’s human capital. While some domestic industries may face increased competition, the broader impact is expected to be positive—improving quality, diversity, and global integration.

Sectoral Impact of the FTA

Textiles: India currently holds a 6% share of the UK’s readymade garments (RMG) market. Countries like Bangladesh and Vietnam previously enjoyed a 12% tariff advantage over India due to duty-free access. With the new FTA, India now achieves parity and even gains a 12% edge over China, which has the largest share. This is expected to double India’s market share to 12% and bring in an additional $1.1–1.2 billion annually.

Electricals and Engineering: Tariffs on these goods, ranging from 8% to 14%, will be eliminated. Products like steel, construction equipment, scientific tools, and automotive components are expected to benefit. The FTA is also likely to attract foreign investment and promote joint ventures, with exports projected to grow by 15% annually through 2030.

Gems and Jewellery: Indian exporters of gems and jewellery will benefit from reduced tariffs—previously up to 4%—and better access to the UK’s premium consumer market. This will help both major exporters and smaller artisan-driven businesses. Exports in this segment are also expected to grow over 15% per year.

In summary, the India-UK FTA is a significant policy move that aims to create more balanced, efficient, and competitive trade flows between the two countries. By improving access, reducing costs, and encouraging investment, the agreement is poised to open up new avenues for growth in both economies—especially for Indian exporters looking to expand their global footprint.

India–UK FTA could expand trade by 15%

Sectoral Impact of the FTA

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India–UK FTA could expand trade by 15%

Sectoral Impact of the FTA

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