India-UK FTA signed, $56 billion bilateral trade to double in 5 years

Union Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Jonathan Reynolds signed a Free Trade Agreement (FTA) that provides zero-duty access to 99% of India’s exports to the United Kingdom. The agreement is expected to see bilateral trade between the two countries double from the current $56 billion in the next five years. The deal also exempts Indian professionals from UK Social Security payments for three years.

Processed food exports from India will get the biggest boost as the UK cuts existing tariff on such goods from up to 70% to zero. Export of vegetable oil (from a maximum tariff of 20% to nil), auto and transport goods (18% to zero), leather and foot wear (from 16% to zero), electrical machinery (14% to nil), textiles (12% to zero) etc will also become easier as part of the deal.

Industry body Confederation of Indian Industry (CII) termed the FTA as a transformational milestone in bilateral economic relations. A 16-member industry delegation led by Sunil Bharti Mittal, founder and chairman of Bharti Enterprises and co-chair of the India-UK CEO Forum, is accompanying Prime Minister Modi on his visit to the United Kingdom, which culminated in the signing of the agreement today.

“Indian industry across all sectors welcomes the India-UK FTA with great optimism. This agreement establishes a modern, forward-looking partnership that will stimulate innovation, ease market access, and foster investment. Businesses in India as well as the UK stand to gain tremendously, as it lays the groundwork for scaling up bilateral cooperation across key growth sectors," Mittal said.

Once implemented, the India–UK FTA is expected to reduce trade barriers, enhance investor confidence, and promote joint ventures and technology transfers, especially in labour-intensive sectors like textiles & apparel, leather & leather goods, gems & jewellery, marine products, besides others. The agreement will provide a strong framework for unlocking new opportunities in clean energy, digital technologies, life sciences, and advanced manufacturing. India’s rapidly growing market and manufacturing capabilities, combined with the UK’s strengths in innovation, finance, and high-end services, will further accelerate bilateral economic relations.

Another key benefit of the FTA is a reciprocal Social Security Agreement, allowing Indian professionals in the UK to continue home country contributions for up to three years.

“The landmark trade agreement between India and the UK marks a transformative moment in the global economic landscape. It’s not just a win for trade, but a blueprint for a modern, values-led partnership that puts innovation, sustainability, and inclusive growth at the heart of global collaboration," Anish Shah, Group CEO & MD, Mahindra Group, said.

"At Mahindra, we believe deeply in the power of such cross-border partnerships to unlock economic potential, create high-quality jobs, and accelerate progress in future-facing sectors from green mobility and clean energy to digital technologies and advanced manufacturing," he added.

India’s average tariff on UK products will drop from 15% to 3% which means British companies selling products to India from soft drinks and cosmetics to cars and medical devices will find it easier to sell to the Indian market.

Similarly, whisky producers will benefit from tariffs slashed in half, reduced immediately from 150% to 75% and then dropped even further to 40% over the next ten years - giving the UK an advantage over international competitors in reaching the Indian market.

The deal will help UK’s large and varied manufacturing sectors from tariffs cut on aerospace (as high as 11% reduced to 0%), automotives (up to 110% down to 10% under a quota) and electrical machinery (from up to 22% down to either 0% of a 50% reduction), a UK government press release said.