India and the UK successfully conclude free trade agreement; PM Modi lauds it as a ‘historic milestone’

India and the United Kingdom have successfully concluded their much-touted and awaited bilateral Free Trade Agreement (FTA), Prime Minister Narendra Modi announced in a post on X. Lauding it a historic milestone, he said that the agreement—along with a Double Contribution Convention—is “ambitious and mutually beneficial”.

“These landmark agreements will further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies. I look forward to welcoming PM Starmer to India soon,” Modi added.

In March this year, India and the UK re-launched the negotiations for an FTA when Union Commerce Minister Piyush Goyal and Jonathan Reynolds, UK Secretary of State for Business and Trade, addressed a joint press conference. At the time, both had expressed optimism that the two countries would sign a forward-looking, transparent, ambitious, equitable, balanced, and mutually beneficial agreement, which would be a win-win for both countries.

Talks for the India-UK deal got stuck after 14 rounds of negotiations because of a regime change in the UK last year. The incumbent UK Premier Keir Starmer and Indian Prime Minister Modi had, on the sidelines of the G-20 Summit in Rio de Janeiro, Brazil, in November 2024, decided to re-launch the India-UK FTA talks.

In 2021, Elizabeth Truss, then the U.K. Secretary of State for International Trade, who then went on to become the Prime Minister, had told Fortune India in an exclusive interview that there is a “strong basis” for an FTA between the U.K. and India. “…I had a very positive meeting with Minister Goyal, talking through the details of our roadmap to ultimately a proposed Free Trade Agreement (FTA),” she had said.

However, despite the initial optimism, negotiations dragged on because of a complex mix of economic, political, and strategic considerations by both countries. India sought greater access for its skilled professionals, especially in IT and services, and tariff reductions on products like textiles, pharmaceuticals, and agricultural goods.

On the other hand, the UK focused on tariff cuts for automobiles, whisky, and financial services, and sought stronger commitments on intellectual property rights, data rules, and climate standards.

Both countries were reluctant to agree on what the other wanted. The UK was reluctant to relax immigration norms significantly, especially post-Brexit, despite India’s demand for easier visas and work access for Indian professionals and students.

For India, alcohol and automobile are sensitive sectors, and deeper access to UK-made cars or Scotch whisky could hurt domestic industries. There were also disagreements over the Investor-State Dispute Settlement (ISDS) mechanism, labour standards, sustainability, and regulatory alignment further slowed progress.

Nonetheless, India and the UK have had a close partnership built through collaboration on security and defence, new and emerging technologies, climate, health, education, research and innovation, green finance, and people-to-people contacts.