The India–UK Free Trade Agreement: Big Win or Big Gamble?
India and the UK have signed a landmark Free Trade Agreement aimed at doubling bilateral trade by 2030. The deal grants India near-total duty-free access for its goods, boosts prospects for agriculture, textiles, and services, and safeguards sensitive sectors. It also signals New Delhi’s evolving trade posture amid parallel negotiations with the US and EU.
In a major milestone for India's evolving trade architecture, New Delhi and London have inked the long-negotiated India–UK Free Trade Agreement (FTA), now formally dubbed the Comprehensive Economic and Trade Agreement (CETA). Touted as India’s most ambitious bilateral trade deal post-2014, the agreement promises to double annual trade volumes to over USD 100 bn by 2030 and deepen India’s economic engagement with a post-Brexit UK looking eastward. Yet while the celebratory headlines are well-deserved, the deal merits a closer look—for what it achieves, what it sidesteps, and what it signals for India’s wider trade and geopolitical strategy.
Agriculture and Rural Win—but with Limited Strategic Depth
India’s negotiators have walked a fine line—protecting politically sensitive sectors like dairy, edible oils, apples, and oats, while securing zero-duty access for over 95% of India’s agricultural and processed food exports. This includes turmeric, pulses, cardamom, mango pulp, and marine items like shrimp and tuna.
States like Maharashtra (grapes, onions), Gujarat (groundnut), and the Northeast (horticulture) are likely to see tangible upside. However, one should temper expectations. India's agri exports to the UK currently stand at just USD 811 mn out of the UK's USD 37.5 bn agri import basket. Bridging this gap will require more than tariff cuts—it needs marketing muscle, streamlined certification processes, and export infrastructure upgrades.
Moreover, the long-term strategic play—moving India from a low-margin commodity exporter to a premium branded food supplier—remains a work in progress.
Labour-Intensive Manufacturing: A Much-Needed Boost
The zero-duty access extended to textiles, leather, footwear, carpets, and handicrafts covers over 1,100 tariff lines. For sectors reeling from demand shifts and high tariffs post-Brexit, the deal brings immediate relief. Indian manufacturers in Tiruppur, Kanpur, and Agra are now on firmer footing to compete with suppliers from Bangladesh, Vietnam, and Turkey.
Industry estimates suggest an additional USD 1 bn in business in textiles alone over the next two years, and a near doubling of leather exports. However, these gains assume supply readiness, quality consistency, and branding capability—areas where Indian SMEs often fall short. Without concurrent investment in skilling and design-led manufacturing, India risks remaining a low-cost supplier rather than moving up the value chain.
Strategic Sectors: From Engineering to Pharma
The FTA is forward-looking in its treatment of engineering goods, pharma, electronics, and chemicals. Tariff elimination on Indian auto components, industrial equipment, and diagnostic devices opens up the UK’s USD 190 bn engineering import market, where India currently has just a 2.2% share.
Likewise, for generic pharmaceuticals—India’s strongest export engine in Europe—the zero-duty access is a potential game-changer. But this too must be balanced against the UK's stringent post-Brexit regulatory frameworks, which many Indian firms find difficult to navigate. Regulatory cooperation is included in the deal but will need sustained follow-through to be meaningful.
Services and Innovation: India’s Strategic Edge
Perhaps the most underappreciated dimension of the FTA lies in services and digital trade. The UK has committed to easing market access for Indian professionals—both high-skilled (IT, consulting) and niche cultural workers (chefs, yoga instructors). The deal’s unique “Innovation Chapter” sets a precedent for future FTAs, opening avenues for joint research, AI cooperation, and fintech exchange.
Given that India’s services exports to the UK are already strong (USD 32 bn+), this agreement could trigger a 15–20% annual growth if matched by targeted investment in digital infrastructure and regulatory harmonisation.
A Step Forward in Geopolitics—but Not a Leap
This deal is as much geopolitical signalling as it is trade liberalisation. For the UK, it is the most substantial FTA signed post-Brexit. For India, it demonstrates maturity in negotiating parity-based agreements with the West, even as talks with the EU and US remain stuck.
However, from a geopolitical lens, the pact is weighted more toward commercial interests than strategic depth. While the parallel UK–India Vision 2035 lays out broader cooperation in defence and climate action, it lacks concrete deliverables. Compared to the India–UAE CEPA or India–Australia ECTA, this deal is more cautious, not comprehensive.
The timing of the deal—amid slowing global trade, shifting supply chains, and rising protectionism—makes it symbolically potent. But it is not yet transformational.
What It Means for the India–US Trade Equation
India’s recent tariff pact negotiations with the US—where limited duty reductions were exchanged for easing trade tensions—stands in contrast to the depth of the UK FTA. While the US deal lacked structural ambition, the UK agreement covers 99% of India’s exports by value. However, it sets a template. By concluding a comprehensive, mutually beneficial FTA with a major G7 nation, India has signalled to Washington and Brussels that it is open to deep trade integration—on its terms.
Yet any future deal with the US will face tougher scrutiny over data flows, digital taxation, and IP enforcement—areas barely touched in the UK agreement. In that sense, the India–UK FTA is a solid platform, not a ceiling.
The India–UK FTA delivers strong optics and pragmatic gains. It lowers costs, opens markets, and strengthens India’s export competitiveness in key sectors. It avoids pitfalls—by safeguarding domestic sensitivities—and expands India’s influence as a credible trade negotiator. But it also reveals familiar constraints. Tariff cuts will not translate into trade gains without complementary reforms in logistics, quality control, branding, and MSME support. Nor can India afford complacency when it comes to capturing value in services, digital, and green trade. This is a good deal—potentially a great one. But real success will lie in execution. If India can convert tariff access into structural advantage, this FTA may indeed become the launchpad for the USD 1 trn export economy it aspires to be.