India–UK Free Trade Agreement: A Strategic Opening
By Sanjeev Oak
Sanctioned in 2025, the India–UK Free Trade Agreement (FTA) is poised to reshape the contours of bilateral trade, investment and strategic cooperation. For post-Brexit Britain, it marks a major breakthrough; for India, it is a significant step in advancing its export-driven, self-reliant economic agenda.
At a time when India was mounting a strong counter-offensive to the Pahalgam terror attack through Operation Sindoor, a landmark development was simultaneously unfolding in the diplomatic sphere. On the 6th of the month, India and the United Kingdom signed a historic Free Trade Agreement after nearly three years of negotiations that began in January 2022.
The agreement has been described by Prime Minister Narendra Modi as a “milestone” that will enhance bilateral trade, investment, job creation, and innovation. While negotiations were underway, the UK witnessed several political changes, including four leadership transitions. India, too, went through elections. Despite delays, the agreement—finalised in 2025—is being seen as a comprehensive deal that extends far beyond tariff cuts.
Tariff Reductions and Market Access
Under the agreement, India will eliminate import duties on 99% of UK exports, especially items like Scotch whisky, gin, luxury automobiles, cosmetics, medical equipment, and processed foods. These tariff cuts are to be phased in over the next decade. In return, the UK has lifted tariffs on 99% of Indian exports, which include traditional sectors such as textiles, gems and jewellery, and processed food products.
Access for Indian professionals—yoga instructors, chefs, and musicians—has been streamlined under relaxed visa norms, and Indian workers posted in the UK will now be exempted from National Insurance contributions for up to three years, reducing operational costs for Indian companies.
The agreement is expected to push bilateral trade to $34 billion by 2040. According to estimates, it could contribute €4.8 billion to the UK’s GDP and €2.2 billion in increased wages.
MSMEs and Start-Ups to Gain
Significantly, the agreement opens vast new opportunities for India’s Micro, Small and Medium Enterprises (MSMEs) and start-ups. By reducing tariff barriers and easing market access conditions, Indian exporters are better positioned to enter a developed market like the UK. The elimination of duties on 99% of Indian exports will create substantial headroom for growth, particularly in traditional sectors.
“This is not just a trade deal; it’s a strategic convergence of two democracies charting a new global economic course.”
Additionally, sectors like defence technology, artificial intelligence (AI), and green energy are expected to witness intensified bilateral cooperation. British companies are eager to participate in India’s self-reliant defence manufacturing and clean energy ambitions.
Strategic Depth and Cultural Expansion
The FTA goes beyond trade. It reflects a recalibration of geopolitical partnerships. For India, this agreement builds a direct economic bridge to Europe, enabling it to bypass overdependence on China-centric supply chains. It also boosts India’s strategic profile as a preferred trading partner in the global South.
Indian services—ranging from IT to wellness—are poised to benefit from this greater engagement. Enhanced mobility for Indian chefs, musicians and yoga professionals not only expands economic opportunities but also augments India’s cultural diplomacy.
“The UK gets easier access to one of the world’s fastest-growing middle-class markets; India gains entry into a high-value Western consumer base.”
India’s burgeoning middle class—estimated at over 400 million—is expected to drive demand for premium British goods. Meanwhile, the agreement strengthens India’s case for similar FTAs with the European Union and the United States, positioning India as an alternative to China in global trade realignments.
Post-Brexit Context and the Way Forward
This is the most significant trade pact signed by the UK since Brexit and the most wide-ranging deal India has concluded with any Western country. For the UK, struggling with slow growth and having lost access to the EU single market, India offers scale, diversity, and demographic advantage. For India, the FTA offers a pathway to increase exports, boost MSMEs, attract investment, and secure cutting-edge technologies.
The agreement is particularly relevant in three domains:
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MSME Empowerment: Export potential for smaller enterprises will rise sharply, contributing to employment and economic inclusion.
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Service Sector Expansion: Indian start-ups and skilled professionals will gain entry into the UK market, particularly in sectors like fintech, AI, and design.
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Geopolitical Realignment: India’s access to Europe through the UK builds resilience against China’s trade dominance and enhances India’s stature in the WTO and other multilateral platforms.
A Defining Moment
The India–UK FTA must not be seen as a mere economic transaction. It is a strategic realignment—one that reflects mutual interests, shared democratic values, and the aspiration to shape the future of global trade in a multipolar world. With its focus on sustainable trade, technology collaboration, and cultural ties, the agreement is an important building block in India’s Atmanirbhar Bharat (self-reliant India) vision. The opportunity is historic. It must now be translated into action on the ground—through agile policymaking, capacity building, and a concerted push from India’s export sector.