Historic India-UK FTA Signed! 99% Indian Exports to Enter UK Duty Free

After nearly three and a half years of intense negotiations, India and the United Kingdom have officially signed a landmark Free Trade Agreement (FTA) on July 24, 2025, during Prime Minister Narendra Modi’s state visit to London. 

For the UK, this is being hailed as its biggest post-Brexit trade success. For India, it’s a strategic step to unlock Europe’s markets and deepen economic engagement with a G7 nation.

Let’s break down what the agreement covers, which sectors will benefit the most, what remains unresolved, and how both countries stand to gain.

What’s in the FTA?

The India-UK deal includes tariff eliminations, regulatory cooperation, professional mobility, services trade, digital commerce, and intellectual property. It’s wide-ranging and comprehensive, with some parts coming into effect immediately and others gradually over the next 5 to 15 years.

Key Highlights:

• India gets zero-duty access for 99% of its exports to the UK, covering nearly 100% of the value of goods traded.
  
• The UK gets tariff reduction on 90% of its exports to India, including whisky, automobiles, salmon, chocolates, cosmetics, and more.
  
• Bilateral trade, currently valued at around USD 60 billion, is expected to double to USD 120 billion by 2030.

Source: Business Today

Sectors That Will See Big Gains

This FTA isn’t just a political handshake. It has sector-wise implications, especially for manufacturing, services, and labour-intensive exports from India. Here’s where the big shifts will happen:

Textiles & Apparel

• Indian garments, previously subject to 8–12% UK import duties, will now enjoy zero tariffs.
  
• Exports from hubs like Tiruppur, Ludhiana, Surat, and Moradabad are expected to rise sharply.
  
• Estimated boost: ₹35,000 crore to ₹40,000+ crore in textile exports in FY25.
  
• Tiruppur alone may see employment expansion for its 1 million+ workers, 65% of whom are women.

Pharmaceuticals & Medical Devices

• 99% of India’s pharma and med-tech exports now qualify for zero-duty entry into the UK.
  
• Regulatory procedures for market entry have been simplified, giving India’s low-cost, high-quality producers a larger playground.

Chemicals & Plastics

• Tariff elimination for iodine, agrochemicals, and specialty chemicals.
  
• Export potential could double to $1 billion by FY30, especially for MSMEs.

Auto Components

• Indian-made auto parts and machinery gain zero-duty access into the UK.
  
• Expected to strengthen the Make in India narrative and bolster the auto MSME sector.

Services & Professional Mobility

• The agreement boosts access for Indian IT, financial services, education, and consumer services firms in the UK.
  
• Provisions include:
  
  • 1,800 visas per year for Indian professionals (e.g., yoga instructors, artists, chefs).
    
  • 3-year exemption from UK’s national insurance contributions for short-term Indian workers.
    
  • Easier rules for intra-company transfers and recognition of Indian professional qualifications.

Source: Economic Times

What’s Off the Table?

Despite its scope, the FTA falls short of full coverage. Notably:

• Agriculture: Completely excluded at India’s request due to domestic sensitivities.
  
• Carbon Border Adjustment Mechanism (CBAM): The UK didn’t clarify how its upcoming carbon tax will apply. Starting 2027, this could cost Indian exporters $775 million/year.
  
• Bilateral Investment Treaty (BIT): Still under negotiation. The UK wants a sunset clause; India wants protection from retroactive tax claims.

These sticking points mean that while the deal is a major win, some high-stakes issues still remain on the table.

Source: The Guardian

Future Impact on Bilateral Relations

The FTA is positioned as the cornerstone of a broader India–UK Comprehensive Strategic Partnership, aimed at enhancing cooperation not just in trade but also in technology, security, education, and climate change.

Expected Outcomes by 2030:

• Trade volume to increase from $60 billion to $120 billion.
  
• UK GDP projected to rise by £4.8 billion/year.
  
• Wage growth of £2.2 billion/year in the UK.
  
• India expects the creation of 5 million+ jobs, mostly in export-led sectors.
  

Beyond the economic numbers, the agreement solidifies India’s role as a preferred partner in the UK’s global trade strategy post-Brexit and helps India strengthen its economic footprint in Europe.
Source: Business Today

Market Reaction: Calm but Focused

On the day following the announcement:

• Indian stock markets opened flat; Nifty hovered near 25,000.
  
• No dramatic index-wide spike, but:
  
  • Textile, leather, footwear, and auto component stocks saw selective buying interest.
    
• Analysts say broader movement may follow after clarity on unresolved issues like BIT and CBAM.

The subdued market response reflects a “wait and watch” approach, with investors likely evaluating the fine print before recalibrating long-term positions.

What’s in It for India?

• Tariff-free access for nearly all exports to the UK.
• Boost to labour-intensive sectors like textiles, apparel, and gems & jewellery.
• Greater opportunities for IT services, pharma, and med-tech.
• Visa relaxations and social security benefits for skilled workers.
• Potential for 5M+ job creation.

What’s in It for the UK?

• Reduction in tariffs on premium goods like Scotch whisky, gin, cars, chocolates.
• Estimated economic uplift of £4.8 billion/year in GDP.
• Better access to Indian procurement markets and services sector.
• Enhanced strategic footprint in Indo-Pacific trade corridors.
• Long-term gains in sectors like automobiles and education.

Source: Business Today

A Few Hurdles to Watch

• UK auto sector voiced concerns over phased quotas: car imports face long wait-times for full benefit, with high duties till the early 2030s.
  
• MSME exporters in India may struggle with documentation and compliance with new standards (e.g., BCI, OEKO-TEX).
  
• Environmental clauses, such as CBAM, may erode some trade gains unless they are resolved quickly.

Final Takeaway

The India–UK FTA marks a turning point. It opens up opportunities across traditional and emerging sectors, fosters deeper institutional ties, and sets the stage for long-term trade cooperation. While certain gaps remain—especially around investment protection and sustainability regulations—the broad consensus is that both countries now have a stronger platform to build from.

For exporters, investors, and professionals, the next few years will determine how well the FTA translates from agreement to impact. The paperwork is done. Implementation begins now.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.