The India-UK Free Trade Agreement (FTA), agreed to on May 6, 2025, is a historic breakthrough in bilateral trade arrangements, which will create a whole new dynamic between the two countries’ economies. Towards a target of doubling trade to $120 Billion by 2030, this India-UK Trade deal scraps or lowers tariffs for a wide range of products and services, promoting growth in priority areas.
This article goes into the complete analysis of the India-UK FTA - tariff reduction on the crucial imports and exports pointing out the opportunities and strategic implications for businesses and consumers in India.
The India-UK FTA 2025 cuts tariffs across sectors, opening the doors for massive trade and investment opportunities. The strategic deal aims to double bilateral trade to $120 Billion by 2030, strengthening supply chains, supporting job creation, and boosting two-way trade goals.
The India-UK FTA is an answer to global trade uncertainties, namely, those, which were initiated with the U.S. tariff policies under President Donald Trump. With the reduction of tariffs by 99 percent on Indian exports to the UK and 90 percent on the exports from the UK to India, the deal gives a competitive advantage to various industries from textiles to automobiles. Such an extensive deal not only increases bilateral trade but also becomes a precedent for future deals with both the EU and the U.S.
Key Takeaways:
- Notable Tariff Cuts Reshaping India-UK Trade Landscape
- UK Whisky & Gin Now 30 Percent Cheaper in India
- Luxury UK Cars Become Affordable in Indian Market
- Indian Textiles Gain Global Power with Zero-Duty Access
The FTA on a large scale lowers the tariffs on the exportation of UK whisky and gin to India the biggest consumption market of whisky the world over. Scotch Whisky and gin, which were charged at 150 percent are reduced to 75 percent from the onset and then reduced to 40 percent after ten years. This reduction is predicted to reduce prices to Indian consumers by 10-30 percent making premium UK things easily affordable. The Scotch Whisky Association expects a £1 billion surge in exports in five years, translating into 1,200 jobs in the UK; Indian bottling industries are likely to gain jobs.
The agreement turns the imports of UK automobiles to India. UK cars’ tariff (exceeding 100 percent) is lowered to 10 percent under a quota system – high-end vehicles, such as Jaguar Land Rover, and EVs. This India-UK economic partnership might reduce prices for Indian consumers, thus making premium UK cars more affordable. India also gains a quota for the exportation of a low- and mid-range EV to the UK, which is crucial for developing the country’s automotive supply chain.
Indian textile exporters benefit a lot from the UK removing tariffs for 99 percent of all Indian goods like textile/ apparel goods. Indian textiles were previously subjected to as much as 12 percent duties, but can now enter duty-free resulting in increased competitiveness with competitors such as Bangladesh and Vietnam. The performance of UK-India trade negotiations is likely to increase woven apparel exports to $1.6 billion by 2027 to provide jobs to India’s labor-intensive textile industry.
Benefits for Indian Exporters
The FTA creates broad opportunities for the Indian exporters. As 99 percent of Indian’s export to the UK is zero duty, the sector of leather, footwear, gems and jewelry, marine products, and automobile receive improved access to markets. The agreement also relaxes Indian professionals’ visa requirements and eliminates UK’s social security from Indian professionals (musicians, IT workers), and saves Rs. 4,000 crore. Two-way trade is set to reach $120 billion by 2030.
In a press release, the India Government states that, “The FTA ensures comprehensive market access for goods across all sectors, covering all of India’s export interests”.
The India – UK FTA is a strategy against the impending wave of global protectionism, by cutting the dependencies on the Chinese supply networks, and rewriting the post-Brexit trade. By eliminating 90 percent of the UK imports to India and 99 percent of the Indian imports to the UK, it contributes towards inclusive growth and strong supply chain.
This record deal is not only making the consumers more affordable and having a reasonably wide choice but also turning two countries into trade leaders in the world arena.
The India-UK Trade Agreement is a watershed move to bring about the improvement of the relations in the trading between India and the UK and the enhancement of the economic relationship between the two nations. With negotiations headed towards an all-encompassing India-UK Free Trade Agreement (FTA), important developments are emerging in some of the key areas. Through the agreement, India-UK bilateral trade is expected to flow smoothly due to the removal of tariffs, establishment of investment, and encouragement of innovation.
The FTA also foresees an expansion of the UK exports to India in such areas as machinery, pharmaceuticals, and food products, among others and facilitates reduced tariffs on the India exports to the UK such as garments, IT services and agricultural goods. This bilateral framework can open up opportunities in the trade of food products, increase the MSMEs, and strengthen the supply chain.
Overall, the India-UK FTA promises to become a win-win situation that provides the rapid growth of the economy and strengthened geopolitics.
Munjal Almoula, Head of Tax, BDO India
“The India–UK Free Trade Agreement (FTA) marks a significant milestone in strengthening bilateral relations between the two countries. While the legal text is still being finalized, initial announcements indicate that, over the next 10 years, the UK will eliminate duties on 99% of goods exported from India, while India will offer similar concessions on 90% of UK exports. This is expected to boost Indian exports in textiles, marine products, gems and jewelry, and engineering goods, among others. For the UK, key beneficiaries will include medical technology, auto parts, and other high-value sectors. The agreement also includes provisions for reduced import duties on UK cars (under a quota system) and on whisky and gin. Beyond goods, the FTA is set to promote growth in services trade, particularly in financial services, professional services, and IT/ITeS. Overall, the FTA aims to forge stronger economic ties between two of the world’s largest economies and drive mutual growth and opportunity.”
Arbinder Chatwal, Assurance Partner at BDO UK, Head of India Advisory Services in the UK
“While we await the finer details, addressing some circulated myths since the announcement of the UK-India free trade deal is essential. There’s been some concern that the economic benefits will be minimal. In reality, this is the largest trade deal the UK has signed with a single trading partner since leaving the EU. It’s projected to boost the UK economy by GBP 4.8bn, increase wages by GBP 2.2bn, and increase bilateral trade by GBP 25.5bn—far from marginal. More significantly, this deal gives UK businesses a first-mover advantage in a vast and rapidly growing market, which is set to become a key trade and investment partner in the years ahead.
Also, while much of the commentary has focused on tariff reductions benefiting India, it's important to recognize that India will be cutting tariffs on GBP 400 Million worth of UK goods immediately upon the deal's implementation. This includes reducing tariffs on whisky and gin, and a major opportunity for the automotive sector, with high-end car tariffs dropping from over 100 percent to 10 percent under a quota system.”
Kumar Duraiswamy, Joint Secretary, Tiruppur Exporters’ Association (TEA)
Traditional textile items, such as sarees and salwars, will see a hike [in demand]. Earlier, due to duty issues, buyers procured a limited number of items from India. Now, with zero duty, they are quite excited and want to increase their business with India on multiple levels.
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