LONDON: In a significant move to bolster economic ties, the United Kingdom and India officially signed a comprehensive Free Trade Agreement (FTA) this week, on May 6th, 2025. Described by both nations as a “historic” and “landmark” deal, the agreement aims to slash tariffs, streamline trade processes and unlock substantial opportunities for businesses across a wide array of sectors in both countries.

After three years of negotiations, the deal is expected to boost bilateral trade by £25.5 billion and increase the UK’s GDP by £4.8 billion in the long run. This agreement is the most economically significant trade deal the UK has signed since leaving the European Union. 

Key Highlights of the FTA:

India is a “Priority Trade Nation” for UK Asia Trade and Investment Council. The FTA is a significant achievement for our organisation, UK and India. The FTA focuses on reducing tariffs, expanding market access and fostering economic growth for both nations. Some of the most notable provisions include:

1. Tariff Reductions

The agreement entails significant tariff reductions on a wide range of goods. India will eliminate tariffs on 90% of its tariff lines, covering 92% of existing goods imports from the UK. Immediately upon the FTA coming into force, 64% of tariff lines will be eligible for tariff-free export to India, increasing to 85% within a decade. Similarly, the UK will eliminate tariffs on 99% of Indian goods.

For British businesses, the tariff reductions include cosmetics, aerospace, medical devices, electrical machinery, soft drinks, and food products such as lamb, salmon, chocolate and biscuits. Tariffs on whisky and gin will be halved from 150% to 75%, eventually dropping to 40% by the tenth year. Automotive tariffs will fall from over 100% to 10%, subject to a quota. Tariffs will be reduced or eliminated on products like lamb (immediate zero tariff), chocolate, biscuits, and salmon. Similar reductions will apply to cosmetics and toiletries, medical devices and perfumes.

Indian businesses will enjoy immediate tariff-free access for 99% of goods exported from India to the UK. Important beneficiaries will be Indian textiles and apparels, footwear, gems and jewellery, food and autoparts companies.

Consumers in both India and the UK will benefit from lower tariffs on imports, bringing prices of goods and services down. 

2. Services and Digital Trade

The agreement aims to reduce barriers to digital trade and promote compatibility of digital trading systems. Key provisions include: 

• Legal recognition of electronic contracts and electronic authentication.
• Protection against forced transfer of source code for businesses. 
• Measures to minimise unsolicited commercial messages (spam) to protect consumers. 
• Provisions on cross-border data flows and data localization, offering opportunities for future negotiation of these rules.
• Guaranteed market access for UK businesses in covered service sectors, ensuring they receive the same treatment as domestic Indian businesses. This removes the need for UK companies to establish a physical presence in India or be resident in India to supply services in covered sectors. Key sectors include financial and professional business services. 
• Commitment to identify and encourage mutual recognition of professional qualifications between relevant UK and Indian bodies. A professional services working group will monitor and support this.

3. Government Procurement:

UK businesses will gain unprecedented access to India’s vast procurement market, which includes around 40,000 tenders annually from federal government bodies, worth an estimated £38 billion. This opens significant opportunities for UK companies in sectors like clean energy, transport, healthcare and life sciences. Notably, preferential treatment previously limited to domestic Indian manufacturers under the ‘Make in India’ policy will now be extended to UK companies with at least 20% UK content in their products or services.

4. Movement of People: 

The FTA includes provisions to facilitate the temporary movement of professionals between the UK and India for purposes such as attending conferences, intra-company transfers and supplying services as part of a contract. Visa application processes are intended to remain transparent, avoiding unnecessary obstacles for professionals in sectors like engineering, architecture, accountancy and management consultancy. A significant development is the Double Contributions Convention (DCC), a social security pact where Indian employees temporarily seconded to the UK for up to three years (and vice versa for UK staff in India) will be exempt from paying social security contributions in the host country, continuing to contribute to their home country’s system. This is expected to make it more financially attractive for UK firms to second Indian workers to the UK.

5. Intellectual Property: 

Copyright protections for creative works exported to India will be reinforced, ensuring protection for at least 60 years. India will also review its own copyright and procurement terms.

Opportunities Across Industries:

For UK Businesses in India:

• In the food and beverage industry, there is significant potential for increased exports of whisky, gin, chocolate, biscuits and high-quality food products like salmon and lamb due to reduced tariffs.
• For the automotive industry, lower tariffs on cars and components can enhance the competitiveness of UK automotive manufacturers in the Indian market.
• For advanced manufacturing and engineering, reduced tariffs on machinery, aerospace components and medical devices create opportunities for growth in exports.
• For the financial and professional services industry, greater market access and equal treatment to domestic players will benefit UK financial institutions, legal firms and consultancy services.
• Streamlined digital trade rules will facilitate the expansion of UK tech companies and digital service providers in the Indian market.
• Access to India’s government procurement market opens doors for UK companies in key sectors such as clean energy, healthcare and infrastructure.

For Indian Businesses in the UK:

• For the textiles and apparel industry, tariff elimination will make Indian clothing and footwear more competitive, potentially leading to increased market share and exports.
• For the gems and jewellery companies, duty-free access will boost the export of Indian gems and jewellery to the UK.
• For the automotive components businesses, lower UK tariffs can enhance the export of Indian auto parts to the UK manufacturing sector.
• For the Indian IT and professional services industry,  eased visa regulations for Indian professionals can facilitate greater participation in the UK’s technology and services sectors.

What Happens Next:

Following the signing, both countries will now work to finalise the legal text of the agreement. It will then undergo ratification processes in both the UK and India before it officially comes into force. Negotiations for a separate Bilateral Investment Treaty are also ongoing, which would further promote trade and investment between the two nations.

The UK-India FTA marks a new era in the economic partnership between the two countries, promising enhanced trade flows, increased investment and stronger business collaborations, unlocking unprecedented potential for businesses in both the UK and India. Businesses should prepare to capitalise on the new opportunities.