New Delhi: After years of complex negotiations, India and the UK on Tuesday finally concluded a landmark Free Trade Agreement (FTA) that promises to reshape the economic and strategic contours of their bilateral relationship.
The deal – ambitious in scope and mutually advantageous - marks a post-Brexit milestone for Britain’s global trade aspirations and a significant win for India’s efforts to expand access to Western markets. Beyond tariffs and trade flows, the agreement is poised to deepen economic interdependence and strengthen geopolitical ties between the two democracies, navigating an increasingly fragmented global order.
“Delighted to speak with my friend PM @Keir_Starmer,” Prime Minister Narendra Modi posted on his X handle. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention. 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.”
According to a separate press release issued by the Prime Minister’s Office, Modi and his British counterpart, Starmer, held a telephonic conversation during the course of which they welcomed the successful conclusion of the FTA and the Double Contribution Convention.
“The leaders described it as a historic milestone in the bilateral Comprehensive Strategic Partnership that would foster trade, investment, innovation and job creation in both economies,” the press release stated. “Both agreed that the landmark agreements between the two big and open market economies of the world will open new opportunities for businesses, strengthen economic linkages, and deepen people-to-people ties.”
According to the statement, Starmer said that strengthening alliances and reducing trade barriers with economies around the world is part of the UK’s Plan for Change to deliver a stronger and more secure economy.
“The two leaders agreed that expanding economic and commercial ties between India and the UK remain a cornerstone of the increasingly robust and multifaceted partnership,” the press release further stated. “The conclusion of a balanced, equitable and ambitious FTA, covering trade in goods and services, is expected to significantly enhance bilateral trade, generate new avenues for employment, raise living standards, and improve the overall well-being of citizens in both countries. It will also unlock new potential for the two nations to jointly develop products and services for global markets.”
Modi also invited Starmer to visit India, according to the statement.
What is the economic significance of the India-UK FTA?
The successful conclusion of the FTA marks a pivotal moment in the economic and strategic partnership between the two nations. After over three years of negotiations, this comprehensive deal is poised to significantly enhance bilateral trade, investment, and geopolitical collaboration.
“This Agreement sets a new benchmark for equitable and ambitious trade between two large economies,” Minister of Commerce and Industry Piyush Goyal was quoted as saying in a press release issued by his ministry. “It will benefit Indian farmers, fishermen, workers, MSMEs, startups and innovators. It brings us closer to our goal of becoming a global economic powerhouse. This FTA is not only about goods and services, but also about people, possibilities and prosperity. It protects our core interests while opening doors to India’s greater participation in global value chains.”
The press release cited Commerce Secretary Sunil Barthwal as saying that “this FTA is a gamechanger and will set India further on the path of rapid economic growth and benefit India’s global integration”.
“This is the most comprehensive free trade deal ever entered into by India and will be the gold standard for our future engagements,” Barthwal said.
The FTA is designed to benefit small and medium enterprises (SMEs) by simplifying trade procedures and reducing costs. For Indian SMEs, this opens up opportunities to expand into the UK market, while British SMEs can leverage easier access to India's vast consumer base.
Under the Double Contribution Convention, India has secured an exemption for Indian workers who are temporarily in the UK and their employers from paying social security contributions in the UK for three years. This will make Indian service providers significantly more competitive in the UK.
Describing the FTA as a huge economic win for the UK, delivering for working people and British businesses, a separate press release issued by the British High Commission in New Delhi cited Prime Minister Starmer as underscoring the need to go further and faster to get things done “to secure and renew our country” during his telephonic conversation with Modi.
“Through pragmatism and purpose, the leaders noted that this historic deal is the biggest the UK has done since leaving the EU, and the most ambitious India has ever done,” the press release stated.
“When the UK got out of the European Union (EU), the British economy was in doldrums,” Abhinav Pandya, founder, director and CEO of the Udaipur-based Usanas Foundation think tank, told ETV Bharat. “They needed to diversify.”
Pandya explained that for the UK, India offered a huge market.
“Also, being part of the India-Middle East-Europe Economic Corridor (IMEEC) and the International North-South Transport Corridor (INSTC), India has emerged as a big global power,” he said.
What are the key highlights of the FTA?
Under the FTA, 99 per cent of Indian exports to the UK will benefit from zero duty. India will gain from tariff elimination on about 99 per cent of the tariff line, covering almost 100 per cent of the trade value, offering huge opportunities for an increase in the bilateral trade between India and the UK.
It opens up massive export opportunities for labour-intensive sectors such as textiles, marine products, leather, footwear, sports goods and toys, gems and jewellery, and other important sectors such as engineering goods, auto parts and engines, and organic chemicals.
The FTA is expected to significantly boost trade in services, such as IT/ITeS, financial services, professional services, other business services and educational services. It will open up new opportunities and jobs for Indians in the UK.
It also eases mobility for professionals, including contractual service suppliers, business visitors, investors, intra-corporate transferees, partners and dependent children of intra-corporate transferees with the right to work, and independent professionals like yoga instructors, musicians and chefs.
Under the FTA, India has secured significant commitments on digitally delivered services for Indian service suppliers, especially in professional services such as architecture and engineering, computer-related services and telecommunication services.
India has also ensured that non-tariff barriers are suitably addressed to ensure the free flow of goods and services and that these do not create unjustified restrictions to India’s exports.
What are the strategic and geopolitical implications of the FTA?
For the UK, the FTA represents a significant step in its post-Brexit trade strategy, seeking to establish new trade relationships beyond the EU. India, as one of the world’s fastest-growing economies, offers a substantial market for British goods and services.
India’s engagement in this FTA underscores its commitment to integrating into global supply chains and enhancing its role in international trade. The agreement aligns with India’s broader economic objectives, including attracting foreign investment and promoting exports.
The FTA also paves the way for increased cooperation on global issues such as climate change, digital innovation, and sustainable development. By aligning regulatory standards and fostering joint initiatives, both countries can address shared challenges more effectively.
According to Pandya, by opening up its market, India can bring major powers of the world to its side in today’s global order.
“After the Pahalgam terror attack, some quarters like the Organisation of Islamic Countries (OIC) sided with Pakistan,” he said. “This FTA will bring the UK to our side. We need all major powers on our side.”
To sum up, the India–UK FTA signifies more than just the elimination of trade barriers; it represents a strategic alliance poised to deliver economic growth, innovation, and a stronger geopolitical partnership. As both nations navigate the complexities of the global economy, this agreement serves as a testament to the benefits of collaborative engagement and mutual ambition.
Read more: India, UK Conclude Ambitious FTA, Double Contribution Convention
