How Transformative Will The UK-India Trade Deal Really Be?

The United Kingdom (UK) and India concluded negotiations on a landmark Free Trade Agreement (FTA) on 6 May 2025, marking a major step in strengthening bilateral economic relations. This agreement, described by UK officials as the most comprehensive trade deal India has ever signed with any country, was finalized following high-level discussions between UK Prime Minister and Prime Minister Modi, supported by the UK’s Business and Trade Secretary Jonathan Reynolds and Indian Commerce Minister Piyush Goyal. Simultaneously, both nations agreed to negotiate a Double Contributions Convention (DCC) aligned with the broader trade pact.

This ambitious FTA is designed to stimulate economic growth in both countries by removing trade barriers, improving market access, and offering legal certainty to businesses. The UK government projects that the agreement will increase the UK’s GDP by £4.8 billion and wages by £2.2 billion annually in the long term, while boosting bilateral trade by £25.5 billion per year. These benefits stem from reduced tariffs, enhanced access to goods and services markets, and greater cooperation in areas such as technology, sustainability, and public procurement.

Strategic Importance and Economic Context

The UK government positions this agreement as central to its goal of fostering long-term economic growth. As a trade-reliant nation, the UK seeks to secure international markets for exports and competitive imports to support domestic industries and employment. India, with its rapidly expanding economy, presents significant opportunities. It is the fifth largest economy globally, has the highest growth rate in the G20, and is forecasted to become the third largest by 2028. UK-India trade was already valued at £43 billion in 2024, despite India’s historically high tariffs and complex regulations.

India’s growing middle class and import demands make it an attractive market for UK businesses. By 2030, India’s middle class is expected to reach 60 million people and potentially 250 million by 2050. Between 2021 and 2035, India’s demand for imports is projected to grow by 144 per cent, reaching £1.4 trillion. However, the current business environment poses challenges: India has the highest average tariffs among G20 countries, some exceeding 100 per cent, and is the eighth most restrictive services market globally. Despite this, UK companies remain optimistic—42 per cent of firms without an existing presence in India plan to establish one in the next two years, while 96 per cent of those already operating there intend to expand.

The trade deal addresses these obstacles by providing businesses with greater certainty, reducing costs, and ensuring long-term access. The agreement enhances supply chain resilience, vital in light of recent global disruptions, and positions India as a key manufacturing and economic partner. With India expected to have 21 per cent of its GDP from manufacturing by 2031, the UK aims to tap into this growth potential.

Broader UK-India Collaboration

This FTA is part of a wider strategic effort to deepen ties. The UK and India launched a Technology Security Initiative in 2024, and in March 2025, high-level diplomatic meetings advanced the UK-India Comprehensive Strategic Partnership. These initiatives focus on economic growth, innovation, and addressing shared global challenges like climate change.

The trade agreement reduces bureaucracy and slashes tariffs, making trading cheaper, quicker, and more secure. It includes provisions that allow the UK to revisit terms if India grants better access to other nations in future deals. India has also committed to more than double its tariff reductions over the next decade, ensuring the agreement’s continued relevance as India’s economy evolves.

Economic Gains and Sectoral Benefits

The FTA is expected to accelerate bilateral trade significantly, with UK exports to India projected to grow by £15.7 billion annually. Tariff cuts on existing trade will save UK exporters up to £400 million annually upon implementation, rising to £900 million after ten years. Sectors like advanced manufacturing (automotives, electronics, medical devices), agri-food, and luxury goods (such as cosmetics and whisky) will benefit from reduced duties.

UK services sectors, including telecoms, construction, finance, and professional services, will enjoy guaranteed access to India’s services market. Key provisions include binding India’s foreign investment cap in the insurance sector and promoting the recognition of professional qualifications. UK services exports, which already exceed £500 billion globally, are poised to grow further in India’s expanding market.

In an unprecedented move, UK businesses will gain access to India’s vast public procurement market, which consists of around 40,000 tenders worth at least £38 billion annually. Enhanced trade facilitation measures—like digital documentation, improved customs processing, and harmonized standards—will especially benefit small and medium-sized enterprises (SMEs), who often struggle with market entry barriers. Dedicated SME support and contact points will also be introduced to help them navigate the Indian market.

Regional and Sectoral Opportunities Across the UK

The deal spreads benefits across all UK nations and regions:

Scotland: Its £188 million beverage exports to India (including whisky) will benefit from significant tariff cuts.

Northern Ireland: With £176 million in service exports to India in 2022, Northern Irish firms will see greater market certainty and innovation ties.

Wales: Exports like lamb, currently facing a 33 per cent tariff, will benefit from market access improvements.

England: Regions such as the North West (automotive), West Midlands (electronics), and Yorkshire (logistics) are poised to capitalize. London and the South East, which together exported £3.6 billion in services in 2022, will benefit from new service sector guarantees.

Consumers will also gain from increased product variety and lower prices in goods such as clothing, food, and footwear. The agreement includes consumer protection measures, such as anti-spam provisions for texts originating from India.

Sustainability and Ethical Standards

The FTA also reinforces both countries’ environmental and ethical commitments. India has agreed to the highest environmental standards it has ever included in a trade deal, supporting green trade, renewable energy equipment, and sustainable infrastructure. UK firms will gain access to Indian green procurement markets, enabling them to contribute to India’s net-zero transition. The agreement promotes collaborative efforts on air pollution, marine conservation, deforestation, biodiversity, and waste reduction.

For the first time in a trade agreement with India, chapters on anti-corruption, labour rights, gender equality, and development have been included, reflecting UK values. Key domestic protections remain intact—there are no compromises on NHS integrity, the UK’s points-based immigration system, food and animal welfare standards, or national security prerogatives. The deal is also aligned with the UK’s obligations under the Trade and Cooperation Agreement with the EU and the Windsor Framework concerning Northern Ireland.

Legal and Procedural Steps

The final legal text of the agreement is still being completed and will undergo legal verification before the signing. Following signature, and subject to both countries’ legislative processes, including UK parliamentary approval, the deal will formally enter into force. The Double Contributions Convention (DCC), intended to eliminate double taxation issues, will also be enacted in alignment with the FTA’s timeline.

In summary, the UK-India FTA is a transformative trade pact that positions the UK to benefit from one of the world’s fastest-growing economies. It offers immediate and long-term economic gains, facilitates deeper bilateral cooperation, opens new markets for goods and services, and aligns with broader strategic, environmental, and social goals. It underscores the UK's commitment to global trade, economic resilience, and values-driven diplomacy.