Welcome to this week’s edition of TOPICAL WEDNESDAY! Today, we highlight the facts and figures of recently signed Free Trade Agreement (FTA) between India and the United Kingdom (UK).
In a world where protectionist sentiments are rising, India seems to be charting a different course, one that’s outward-looking and ambitious. Whether it’s the Middle East, Latin America, or other parts of Asia, India is actively strengthening trade relationships, positioning itself as a potential global business hub. A standout example of this renewed push is the recently concluded, and widely praised, India–UK Free Trade Agreement (FTA). This deal promises not only billions in economic benefits but also marks a symbolic leap in India’s trade diplomacy.
However, finalizing the agreement was no easy feat. It serves as both a milestone in India’s global strategy and a model for other trade negotiations. In today’s piece, we’ll walk through a brief history of India–UK trade ties, the significance of the new FTA across sectors, and what it tells us about India’s growing global ambitions.
A Quick Look Back: India–UK Trade Relations:
Post-Independence, the relationship between India and the UK evolved from post-colonial pragmatism into a broad-based partnership spanning trade, education, technology, and culture. While ties remained cordial, progress on deep economic integration often remained limited, constrained by differing geopolitical priorities and global alignments.
However, Brexit proved to be a major inflection point. The UK’s departure from the European Union in 2020 sparked a strategic pivot toward high-growth economies like India. London increasingly saw New Delhi not just as a historical partner but as a vital player in the Indo-Pacific, a hub for digital innovation, and a key market for British goods and services.
Despite this mutual interest, formalizing a Free Trade Agreement proved to be an uphill task. Negotiations were prolonged by frequent political changes in the UK, including multiple prime ministers and shifting policy priorities. This political churn delayed the deal’s finalization, even as both sides expressed intent through initiatives like the Enhanced Trade Partnership (ETP) and the 2030 Roadmap.
Finally, after significant political upheaval, multiple prime ministers, and multiple years of effort, India and the UK recently reached a mutual understanding. Before we move ahead, let’s understand what does an Free trade agreement (FTA) actually mean.
What is free trade agreement?
A Free Trade Agreement (FTA) is a formal arrangement between two or more countries aimed at reducing or eliminating trade barriers such as tariffs, import quotas, and other restrictions. The primary objective is to facilitate smoother and more cost-effective exchanges of goods and services across borders. In doing so, FTAs promote economic cooperation and integration, allowing countries to access each other’s markets more freely.
A key feature of an FTA is the elimination or reduction of tariffs (taxes imposed on imported goods), making foreign products more affordable for consumers and businesses, thereby increasing competitiveness and consumer choice. FTAs also address non-tariff barriers, such as complex customs procedures, safety standards, and licensing requirements, which can otherwise hinder or increase the cost of trade.
India-UK FTA: A Landmark Deal
After years of negotiation and delays, India and the United Kingdom have officially signed a landmark FTA, a deal that marks a significant milestone in bilateral economic relations and positions both nations for a new phase of growth and cooperation. The agreement, finalized in May 2025, is the UK’s most comprehensive trade pact since Brexit and one of India’s most ambitious bilateral deals to date.
Under the FTA, India will eliminate or reduce tariffs on nearly 90% of UK exports, including sectors like automobiles, Scotch whisky, and medical equipment. In return, the UK will provide duty-free access to over 99% of Indian goods, benefiting industries such as textiles, pharmaceuticals, and information technology. This comprehensive agreement is expected to boost bilateral trade by £25.5 billion ($34 billion) annually by 2040.
Beyond goods, the deal opens up services, eases business mobility, strengthens intellectual property (IP) protections, and creates pathways for greater investment and collaboration in areas like clean energy, digital trade, and education.
While the FTA aims for broad liberalization, India has strategically protected sensitive domestic sectors and livelihoods, such as dairy items, certain agricultural goods (like fruits), and vegetable oils, which form part of the trade between the two nations.
Currently, India enjoys a trade surplus of nearly $4.5 billion with the UK, indicating that it exports more to the UK than it imports. As tariffs are reduced under the FTA, this surplus is expected to grow further, strengthening India’s trade position even more.
So, what motivated these two nations to actually pursue this bilateral agreement?
Reasons for the FTA :
India’s Perspective: India sees FTAs as an important step toward realizing its vision of “Viksit Bharat 2047”, the goal of becoming a developed nation. Through these agreements, India aims to deepen its integration with the global economy, boost trade, and attract investment and technology from advanced nations. It also reflects India’s growing confidence and readiness to play a more active role in shaping the rules of global trade.
UK’s Perspective: The UK has pursued Free Trade Agreements (FTAs) to diversify trade beyond Europe, reduce EU dependence, and respond to global protectionism. It also aims to open up new growth avenues by gaining access to the world’s largest and fastest-growing economies.
Ultimately, this FTA is more than a tariff-cutting exercise; it is a strategic bet on shared economic futures. For the UK, it signals a pivot toward the Indo-Pacific and an opportunity to tap into one of the world’s fastest-growing consumer markets. For India, it reflects growing confidence in its global trade policy and its ability to shape high-value agreements that support domestic priorities while expanding international reach.
These deals also aim to build more resilient, diversified supply chains and lessen reliance on China-centric networks amid geopolitical uncertainties. This opens up significant export opportunities for India, supports key industries, and offers real, practical benefits for businesses and consumers in both countries.
Now, let’s look at some of the financial benefits expected to flow between the two nations.
India–UK FTA: Strategic Gains Across Sectors
As mentioned, under the FTA, India will eliminate or reduce tariffs on nearly 90% of UK exports. In return, the UK will provide duty-free access to over 99% of Indian goods.
(Source: Company, Bastion Research)
(Source: Company, Bastion Research)
The Bigger Picture: India’s Expanding Trade Strategy
While this significant trade agreement with the UK has just been finalized, India’s ambition to become a global hub is just getting fired up as it works with other nations to forge similar deals. In fact, the India-UK FTA, finalized in May 2025, is seen as a benchmark for ambition, sectoral coverage, and phased implementation, directly influencing India’s approach and negotiations with other major countries. The details of which are mentioned below:
(Source: Company, Bastion Research)
Closing Thoughts
The India-UK FTA is a landmark agreement that will make it easier and cheaper for both countries to trade numerous goods and services. It should help Indian businesses export more, give Indian consumers more choices, and bring British products to India at lower prices. Moreover, this agreement is expected to boost India’s global exports in the future by laying a strong foundation for upcoming trade negotiations and deals. This is a crucial early step in the right direction for India, as it opens up the country to unprecedented opportunities and could fast-track deals India is currently negotiating with other nations.
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Disclaimer: This newsletter is for educational purposes only and is not intended to provide any kind of investment advice. Please conduct your own research and consult your financial advisor before making any investment decisions based on the information shared in this newsletter.
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