Introduction
The India-UK Free Trade Agreement (FTA), finalized on May 6, 2025, marks a historic step toward deepening economic ties between the two nations. Described by the Indian government as a “historic and ambitious deal,” the FTA eliminates tariffs on 99% of Indian tariff lines, covering nearly 100% of trade value, and reduces tariffs on 90% of UK tariff lines.
With bilateral trade valued at US$60 billion in 2024 and projected to reach US$100 billion by 2030, the agreement promises significant economic benefits. This analysis examines the wins and trade-offs for India, focusing on market access, economic growth, services, and the strategic protection of sensitive sectors like dairy.
Wins for India
1. Unprecedented Market Access for Exports
The FTA provides zero-duty access for 99% of Indian tariff lines, encompassing sectors such as textiles, leather, footwear, sports goods, toys, gems, jewellery, engineering goods, auto parts, organic chemicals, and agricultural products like grapes, mangoes, shrimp, and tuna.
This near-complete tariff elimination is expected to boost India’s competitiveness in the high-value UK market, building on projections of a 20% increase in agri-exports within three years and supporting India’s goal of reaching USD 100 billion in agri-exports by 2030. Labor-intensive sectors like textiles and leather are likely to benefit the most, generating rural employment and driving export-led growth.
2. Economic Growth and Job Creation
By removing tariffs on key manufacturing and agri-based industries, the FTA is poised to accelerate job creation. The elimination of duties in sectors like textiles, apparel, leather, and footwear will directly benefit small and medium enterprises (SMEs), many of which operate in rural India.
In addition, the inclusion of processed foods (e.g., mango pulp, pickles) and marine products will bolster India’s agribusiness value chain, attracting investments in storage, processing, and distribution. The agreement supports India’s ambition to double bilateral trade to US$100 billion by 2030, enhancing economic resilience and diversification.
3. Strengthened Services Sector and Professional Mobility
The FTA provides ambitious provisions for Indian services, including IT/ITeS, financial services, professional services (architecture, engineering), and education. These commitments enable Indian firms to expand their footprint in the UK, a key market for India’s service exports.
Provisions on professional mobility will make it easier for Indian service providers, contractual workers, and independent professionals (e.g., yoga instructors, chefs, musicians) to operate in the UK. The Double Contribution Convention (DCC) will save Indian professionals up to 25% of their salary by exempting them from social security contributions for three years, reducing costs for employers and enhancing competitiveness in the global talent market.
4. Consumer and Supply Chain Benefits
Indian consumers could see reduced prices for UK products such as whisky, cosmetics, and medical equipment, with tariffs on whisky alone dropping from 150% to 40% over a decade.
Streamlined customs procedures and commitments on digitally delivered services will improve trade efficiency, lowering transaction costs for businesses. Indian firms will also gain greater access to UK technology and investment, supporting innovation in manufacturing, engineering, and IT sectors.
Trade-offs for India
1. Limited Reciprocal Market Access
India’s decision to exclude dairy, edible oils, and apples from tariff concessions was driven by the need to protect domestic farmers and cooperatives. Commerce Minister Piyush Goyal reaffirmed that dairy imports will remain fully restricted, shielding millions of rural households reliant on the sector.
While this stance safeguards domestic stability, it could limit reciprocal market access for the UK and become a point of contention in future negotiations. India’s 99% tariff elimination far exceeds the UK’s 90%, raising potential concerns over trade balance dynamics.
2. Increased Competition in Domestic Markets
Tariff reductions on premium UK products—such as whisky, gin, cosmetics, and medical devices—could intensify competition for Indian producers, particularly small-scale enterprises. Established UK brands with global recognition may capture market share in premium categories, putting pressure on domestic companies to innovate and upgrade.
The entry of advanced UK technology and products may also disrupt local industries not fully prepared for global competition.
3. Implementation Challenges and Costs
Indian exporters must navigate stringent UK regulations, including food safety standards, phytosanitary norms, and rules of origin. Compliance will require significant investments in infrastructure, certifications, and supply chain upgrades—challenges that smaller businesses, particularly in agriculture and textiles, may struggle to meet.
Moreover, the lack of detailed publicly available tariff schedules and rules of origin creates uncertainty. Proactive planning will be essential for businesses to capitalize on opportunities.
4. Social Security and Mobility Trade-offs
Although the DCC provides financial relief to Indian professionals, its scope remains narrower than full-fledged Social Security Agreements (e.g., with the EU or Canada). The agreement also does not waive the UK’s immigration health surcharge, which could offset some cost benefits.
Increased mobility opportunities may inadvertently contribute to brain drain in niche sectors, with highly skilled professionals seeking long-term opportunities abroad.
Strategic Implications
India’s protectionist stance on dairy highlights the strategic balance between global integration and domestic priorities. Safeguarding the dairy sector ensures the livelihoods of millions of farmers and maintains supply chain control. However, this protection may also limit foreign investment or technology collaboration in dairy, slowing modernization.
The FTA’s focus on services and professional mobility strengthens India’s position as a global leader in IT and professional services, but robust domestic policies will be needed to retain talent and foster skill development.
Conclusion
The India-UK FTA is a transformative agreement that delivers unprecedented market access for Indian exporters, strengthens the services sector, and drives economic growth. With bilateral trade projected to double to US$100 billion by 2030, the deal has immense potential to reshape India’s global trade position.
However, challenges remain in balancing limited reciprocal access, rising domestic competition, and regulatory compliance. India’s deliberate protection of sensitive sectors like dairy reflects a long-term strategy of economic liberalization without compromising rural livelihoods and food security.
For stakeholders in agriculture, dairy, MSMEs, and services, proactive readiness will be key to fully leverage the opportunities unlocked by this landmark agreement.
