Amid the inordinate delays in trade negotiations with the US and the Damocles Sword of Trump tariffs, India has sealed an FTA with the UK. PM Modi, on his fourth visit to the UK, was hosted by his UK counterpart Kier Starmer at his official Country residence, Chequers, for the FTA signing ceremony on July 24, 2025. Leaders formally announced the successful conclusion of the India-UK FTA on May 6^th after three years of negotiations.

The FTA was indeed the cornerstone of the collaborative 2030 India-UK Roadmap laid down by PM Modi and former UK Prime Minister Boris Johnson. As a part of the Enhanced Trade Partnership, countries began the first round of FTA negotiations, virtually in January 2022. The next 15 rounds of talks were held alternatively in Delhi and London.

Beset by contentious issues like mobility visas, carbon tax exemptions and duty cuts on alcohol and electric vehicles and elections in both countries, the talks dragged for over three years. Notwithstanding several leadership changes, post-Brexit, the UK, keen on reviving its stagnant economy, has keenly pursued the talks. With Conservatives at the helm, mobility remained the major roadblock. Expressing willingness for early conclusion of FTA, Labour leader, PM Starmer relaunched the talks in January 2025. Reaching consensus over the thorniest issues, countries finally reached consensus in May.

Traditionally labelled as a laggard in terms of economic diplomacy, New Delhi’s readiness towards FTAs has been rather tepid. Moreso, the ill-conceived and poorly negotiated FTAs clinched pre-2014 turned out to be lopsided. Except for SAPTA (SAARC Preferential Trading Arrangement), the trade imbalances with South Korea, Japan and ASEAN have been steadily increasing. Wary of burgeoning trade deficits, India walked away from China-dominated RCEP (Regional Comprehensive Economic Partnership) in 2019.  

Driven by geopolitical conditions, to spur economic growth and access new markets, India intensified economic partnership with like-minded countries. Post-2022, India sealed new FTAs with Mauritius, Australia and the UAE.  In March 2024, India entered into a Trade and Economic Partnership Agreement (TEPA) with EFTA (European Free Trade Association), a group of four non-EU countries- Iceland, Liechtenstein, Switzerland and Norway. Coming into force from October, the agreement will entail $100 billion in investment in the next 15 years, creating 10 lakh jobs in India.

To ensure equitable and balanced trade, India is seeking to review FTAs with South Korea, Japan and ASEAN. Alongside, to diversify trade and boost economic growth, India has strategically revived FTA negotiations with developed countries to boost investor confidence and remove uncertainty in trade policies.

India’s FTA with the UK, the CETA, Comprehensive Economic Trade Agreement, is a huge milestone in that direction. CETA will provide duty-free access for 99% of Indian exports and covers the entire trade basket, creating numerous opportunities for Indian textiles, marine products, leather, footwear, gems & jewellery, toys and small businesses. Access to new markets can accelerate exports and generate millions of jobs in India.

The service sector, the major growth engine of the Indian economy, would also accrue wide-ranging benefits under Contractual Service Suppliers (CSS) of CETA for IT and IT-enabled services and other 36 sectors, providing vast avenues for growth. Simplified visa procedures and liberalised entry categories are expected to increase the mobility of skilled talent in 16 Independent Professional (IPs) categories, such as Research and Development, Chef, artists, yoga instructors, to the UK.

CETA is expected to double the bilateral trade of $56 billion by 2030. India is the 11^th largest trade partner of the UK. Along with CETA, India has also sealed the Double Contribution Convention, exempting Indian workers in the UK and their employers from social security contributions for three years. This would boost earnings and remittances. The UK is currently the largest source of remittances for India after the US and UAE. 

A 50% duty reduction on 97% of UK exports, mainly alcohol products, medical devices and advanced machinery can increase its accessibility to the large Indian markets. Reeling under economic stagnation post-Brexit, CETA with India will accelerate industrial growth and revive the sixth-largest economy.

With 27 Chapters covering trade and services, labour mobility, including social and developmental issues, the India-UK FTA can serve as the benchmark for India’s future trade negotiations. As per GTRI, India is expected to forego revenue $ 542 million in the first year due to tariff reductions on a wide range of UK imports. Notwithstanding this loss of customs revenue, India went ahead with the FTA, reflecting a massive shift in the trade policy, which is more rational, intended to make Indian industries competitive in the long run. Further, the phased tariff reductions on automobiles should serve as a huge message to President Trump, who has unceremoniously picked on India for the tariffs on high-end luxury bikes.

The FTA, while preserving Indian autonomy, has balanced its commitment to the global norms as set the stage for expediting the long-pending FTA with the EU. Another important key feature of this FTA is a dedicated chapter for gender, which explicitly endorses the critical role of women in economic development. Besides strengthening investment and trade linkages, CETA marks the convergence of the UK’s quest for trade diversification and boosts India’s goal of self-reliance through ‘Make in India, for the World’. Securing its trade interests, India has carefully signed the FTA, expected to come into force by next year after the ratification by the respective Parliaments.

The Carbon Border Adjustment Mechanism (CABM) will come into force in the UK in 2027, and it is not included in the FTA. Alleviating the concerns of the Indian businesses, India has asserted its right to introduce counterbalancing measures to mitigate its impact. However, critical gaps still exist, especially in mobility. Despite Indian efforts, the UK administration is still recalcitrant on its immigration outlook. Similarly, India has restricted access for the UK’s financial and legal services. While the stringent phytosanitary measures of the UK can be an onerous hurdle for Indian farmers.

By and large, India’s landmark FTA with the UK will now serve as a framework for trade agreements with the EU and the US. Trade agreements can help build indigenous manufacturing capabilities to match with the global partners and eventually facilitate integration with the global economy.

CETA has laid the ground for deepening economic partnership with the UK, which is the sixth-largest investor in India with cumulative investments worth $36 billion. India's investments in the UK, valued at $20 billion, generate one lakh jobs. Modi and Starmer also unveiled the India-UK 2035 Vision plan to deepen and diversify bilateral cooperation.

The ambitious Roadmap seeks to nurture education and skills partnership, intellectual partnership, health and life sciences partnership, develop cutting-edge technology and research through the year-old UK-India Technology Security Initiative (TSI) and foster climate partnership to work towards net zero goals.

Leaders have adopted the 10-year defence-industrial roadmap, opening enormous opportunities for collaboration between defence industries. Countries have decided to collaborate on advanced connectivity, cyber resilience, semiconductors, quantum biotechnology and harness the UK-India Research and Innovation Corridor focused on future telecoms, AI and critical minerals.

Replete with geopolitical contestations, challenges and growth opportunities, Indo-Pacific is now a pivotal theatre. Committed to a free, open and inclusive Indo-Pacific, India can be an indispensable partner for the UK in the region. Steering clear of mistrust, resentment and colonial misgivings, both countries have laid a foundation to build a pragmatic and forward-looking relationship based on shared interests with the trade agreement.

Battling similar threats, leaders condemned terrorism and decided to strengthen bilateral and multilateral cooperation in counter-radicalisation, combat financing of terrorism and take concerted action against terrorist entities and their patrons. As marked disapproval of London mayor Sadiq Khan’s inaction despite repeated requests from Indian authorities of the threat from Khalistanis, PM Modi deliberately avoided London. The security breach during EAM Jaishankar’s London visit is still fresh in Indian memory. The two most important appointments of PM Modi – the signing of FTA and meeting with King Charles III were held away from London.

The UK has become a safe haven for Khalistani terrorism and India’s economic offenders. PM Modi brought these issues to the fore in his press briefing. He remarked, “We are united in our view that there can be no place for double standards in the fight against terrorism. We also agree that forces with extremist ideologies must not be allowed to misuse democratic freedoms. Those who misuse democratic freedoms to undermine democracy itself must be held to account. On the matter of extradition of economic offenders as well, our agencies will continue to work together in close coordination and cooperation”.

At a time when mercurial Trump is raining down tariff threats on India, India deftly sealed a trade agreement with the UK as a strategic message to the US. Trump announced a trade deal with India as early as February and set an ambitious target of $500billion bilateral trade. Six months hence, both countries held five rounds of negotiations, with the sixth round scheduled for August 25^th.

At the time of writing, news just trickled in that Trump has announced 25% tariffs on India plus a penalty. By weaponising trade, Trump has recklessly undermined the India-US Global Comprehensive Strategic Partnership. Instructively, factoring in Trump’s transactionalism, India has fast-tracked trade negotiations with various countries. India-UK FTA is thus very timely and augurs well with India’s attempts to buffet the headwinds of Trump’s whimsical trade policies.

References

1. https://www.mea.gov.in/bilateral-documents.htm?dtl/39846/INDIAUK_VISION_2035
2. https://www.mea.gov.in/bilateral-documents.htm?dtl/39848/India__UK_Technology_Security_Initiative__Anniversary_Statement
3. https://www.mea.gov.in/Speeches-Statements.htm?dtl/39845/English_Translation_of_Press_Statement_by_Prime_Minister_during_Joint_Press_Statement_with_Prime_Minister_of_the_United_Kingdom_July_24_2025
4. https://www.mea.gov.in/media-briefings.htm?dtl/39852/Transcript_of_Special_briefing_by_MEA_on_Prime_Ministers_visit_to_UK_July_24_2025