India and the UK announced the conclusion of their bilateral trade agreement on 6 May. The in-principle free trade agreement (FTA) was reached after 14 rounds of negotiations, with UK Prime Minister Keir Starmer due to visit India this year to sign the deal.
While consensus was reportedly reached on most of the FTA’s 26 chapters, the process was stalled by last year’s elections in both countries and political instability in the UK beforehand (there have been four UK prime ministers since FTA negotiations began in 2022).
Under the terms of the FTA, India will cut tariffs across 90 per cent of British product lines, including automobiles (from 100 to 10 per cent), whiskey and gin (from 150 to 75 per cent, dropping to 40 per cent by the tenth year of the FTA), as well as food and drink products, aerospace, medical devices, cosmetics, and electrical machinery.
The tariff cuts are worth over £400 million (based on their 2022 trade figures). The FTA also includes chapters that address issues of environmental and labour standards, gender equality and anti-corruption.
The FTA is one of three economic and trade agreements between both countries. The other two are a Double Contribution Convention Agreement (or social security pact), which was concluded alongside the FTA – and a Bilateral Investment Treaty (BIT), which has yet to be concluded.
Key sticking points appear to have been moved out of the FTA. They include mobility rules of skilled Indian professionals, national insurance contributions by Indian workers on intra-company transfers, and New Delhi seeking an exemption from the UK’s planned carbon tax.
The national insurance issue has been resolved through a social security pact, by which Indian and British workers temporarily living in each other’s country will not have to pay national insurance contributions for three years. Talks are ongoing on the carbon tax issue, while the mobility issue has been addressed with visas being expedited for Indian professionals in selected sectors.
Geopolitical imperatives
The India–UK FTA should be seen in a broader geopolitical context. It comes at a time of growing global economic uncertainty fuelled by the Trump administration’s so-called reciprocal tariff policies. This has accelerated efforts to forge agreements between likeminded countries.
The UK has concluded a string of trade deals in recent years, with Australia, Japan, and Singapore among others. But the one with India is arguably the most significant bilateral agreement since the country’s Brexit vote in 2016. India is the UK’s 11th largest trade partner, with bilateral trade of £42.6 billion in 2024, which accounted for 2.4 per cent of the total trade. The FTA is projected to boost bilateral trade by £25.5 billion by 2040 while increasing the UK’s GDP by £4.8 billion and adding £2.2 billion in annual wages.
The deal is also important to India. While India’s trade with China and the US far surpasses that of the UK, the UK remains an important trade partner. Exports to the UK are six times those to Russia – another important strategic partner for New Delhi. Aside from the UK, India is negotiating trade agreements with the EU and US.
When asked about these trade deals in March, Indian External Affairs Minister S. Jaishankar noted that these countries (including the UK) were India’s key ‘growth markets, technology partners, connectivity partners and strategic partners’.
The India–UK FTA may also grant New Delhi more leverage in trade negotiations with partners such as the EU.
Strategic significance
Beyond the specifics of the deal, the FTA also holds symbolic importance in strengthening the India–UK relationship. Since assuming power last year, the UK’s Labour government has sought to deepen relations with India.
