UK-India Free Trade Agreement facilitate new opportunities for UK service providers in India and their Indian counterparts, particularly in IT, financial services, professional domains, and education. The provisions for additional visas for Indian professionals in IT and healthcare, combined with a three-year exemption from social security contributions for Indian workers in the UK, are a strategic step forward … writes Dr Thankom Arun
The Free Trade Agreement (FTA) between the UK and India is a turning point in the economic relationship and interactions between the two countries. The countries may seek bilateral agreements to strengthen alliances or secure access to specific markets or resources. The partnership with a fast-growing economy is a major accomplishment for the UK in the post-Brexit context, extending its trade relationships beyond the EU. For India, this is their 16th FTA and is vital for expanding its global trading network.
Concluded after over three years of negotiations, this comprehensive accord aims to enhance economic collaboration between the world’s fifth and sixth most significant economies. Having come into effect, the FTA is projected to have already contributed to a £4.8 billion increase in the UK’s GDP this year (2025) and is further anticipated to boost bilateral trade by £25.5 billion annually by 2040.
The trade accord commits India to eliminating or lowering tariffs on 90% of its tariff lines, which account for 92% of goods imported from the UK. This will immediately result in tariff reductions exceeding £400 million, with this saving expected to double within the next ten years. Tariffs imposed on UK whisky and gin exported to India will be reduced from 150% to 75% immediately, decreasing to 40% over the next ten years, representing a notable triumph for UK spirits manufacturers. Exports of UK automobiles to India will witness a decrease in tariffs from over 100% to 10% within a regulated quota system, alongside a parallel gradual reduction for Indian electric and hybrid vehicles entering the UK market.
This agreement facilitates new opportunities for UK service providers in India and their Indian counterparts, particularly in IT, financial services, professional domains, and education. The provisions for additional visas for Indian professionals in IT and healthcare, combined with a three-year exemption from social security contributions for Indian workers in the U.K., are a strategic step forward.
Numerous tariff reductions are scheduled for gradual execution over a decade, suggesting that the immediate benefits for enterprises and consumers in either nation will be limited. However, how far the spirit of the agreement percolates in tackling the non-tariff trade barriers, such as regulatory standards, customs procedures, etc, remains ambiguous. Moreover, increased import competition may have an impact on vulnerable domestic sectors in both countries. Ultimately, the success of an FTA relies on stable political relations and proficient execution, as potential diplomatic strains or economic disruptions may jeopardise the agreement’s advantages.
Further, increasing foreign direct investment facilitates both countries’ infrastructure advancement and job creation. Indian enterprises must comprehend and comply with the rules of origin to optimise the advantages derived from preferential tariffs. UK businesses, particularly those in sectors such as whisky and gin, automobiles, cosmetics, aerospace, medical devices, and food products, will benefit from substantial tariff reductions in the expansive and rapidly expanding Indian market. India’s substantial middle class constitutes a significant growth opportunity for UK goods and services.
In the UK, there are apprehensions regarding the exemption from National Insurance contributions for certain Indian workers, which may disadvantage British workers; however, the government asserts that this exemption pertains only to a limited demographic and is reciprocal. UK exporters must also adhere to the rules of origin to guarantee that their products qualify for preferential treatment in India. While the government projects considerable long-term trade, the actual economic repercussions will depend on various factors and the successful implementation of the agreement, which will impact GDP, presenting new facts about manufacturing competitiveness.
The UK–India accord signifies a progressive and strategic partnership. Conversely, the UK–US arrangement demonstrates how bilateralism addresses deficiencies left by waning multilateral institutions. Both agreements shows the emerging role of bilateral agreements in global trade. Despite the potential drawbacks, bilateralism affords nations a targeted, and efficient mechanism for accomplishing their economic and strategic objectives. The UK’s unique agreements with India and the US exemplify the dualistic nature of this trend: one is expansive and strategic, while the other is constrained and defensive. As the international landscape becomes increasingly fragmented, bilateral trade agreements are poised to profoundly affect global economic policies.
( Dr Thankom Arun is a Professor of Global Development and Accountability at the Essex Business School. Currently, he is a Professor Extraordinaire at the Stellenbosch Business School, South Africa and a Research Fellow at IZA, Bonn)
