On July 24, 2025, India and the United Kingdom sealed a Free Trade Agreement (FTA), a deal hailed as a “historic milestone” by Prime Ministers Narendra Modi and Keir Starmer.
After over three years of negotiations, the agreement promises to reshape economic ties between the world’s fifth and sixth largest economies, projecting a £25.5 billion ($34 billion) annual boost to bilateral trade by 2040. With tariff cuts on 90% of British goods entering India and 99% of Indian exports to the UK, alongside provisions for professional mobility and digital trade, the FTA is being sold as a beacon of economic hope in a world shadowed by protectionism.
But beneath the fanfare, the deal’s true impact is a mixed bag of opportunities, compromises, and lingering gaps that warrant a closer look.
What It Means: A Strategic Win with Tangible Gains
The Indo-UK FTA is a significant post-Brexit triumph for the UK, marking its most substantial trade deal since leaving the EU. For India, it’s a strategic move to deepen global trade integration and reduce reliance on volatile markets like China. The agreement slashes tariffs on 90% of UK exports, with 85% becoming tariff-free within a decade, benefiting sectors like whisky (tariffs dropping from 150% to 40% over ten years), automotive, medical devices, and lamb.
Indian exporters, meanwhile, gain near-universal duty-free access to the UK for textiles, footwear, leather, and gems, aligning with India’s push for job creation in labor-intensive sectors. Bilateral trade, valued at $60 billion in 2024, is projected to double to $100 billion by 2030, with the UK expecting a £4.8 billion GDP boost by 2040.
The deal also opens India’s £38 billion procurement market to UK firms, a rare concession that could bolster British transport, healthcare, and energy sectors. The Double Contribution Convention (DCC), exempting Indian workers in the UK from social security contributions for three years, eases costs for employers and enhances mobility for Indian professionals in IT, finance, and even niche fields like yoga instruction.
For India, this provision is a “huge win,” facilitating access to the UK’s services market without compromising its immigration stance. The FTA’s digital trade provisions, supporting electronic contracts and data flows, align with India’s ambitions to expand its FinTech and IT sectors, while the UK secures regulatory certainty for its service industries.
Strategically, the FTA shields both nations from global trade disruptions, particularly in the wake of U.S. tariff threats under President Trump. For the UK, it’s a cornerstone of its Indo-Pacific tilt and post-Brexit trade realignment. For India, it’s a step toward global supply chain integration, complementing its Production-Linked Incentive scheme and ambitions to become the world’s third-largest economy by 2028.
The inclusion of chapters on labor, gender, and anti-corruption—despite India’s historical resistance—signals a maturing trade policy open to progressive frameworks.
What It Doesn’t Mean: No Panacea for Structural Challenges** Despite the hype, the Indo-UK FTA is not a silver bullet. For one, it sidesteps critical issues like the UK’s Carbon Border Adjustment Mechanism (CBAM), which could impose higher taxes on Indian exports from carbon-intensive industries.
India’s push for a CBAM exemption was relegated to separate talks, leaving a potential $900 million tariff saving unrealized and exposing Indian firms to future trade friction. The exclusion of pharmaceuticals and legal services—key UK sectors contributing £57.8 billion annually—represents a missed opportunity. India’s recent regulatory changes allowing foreign lawyers to practice were not leveraged, limiting the deal’s scope for Britain’s professional services.
Non-tariff barriers remain a thorn. Despite zero duties, Indian agricultural and marine exports face stringent UK standards, which could blunt market access. India’s FTA utilization rate, historically low at 25% compared to 70-80% in developed nations, suggests that businesses—especially MSMEs—may struggle to navigate complex rules of origin or compliance requirements.
The deal’s automotive tariff reductions, capped by quotas, lack clarity, potentially diluting benefits for UK exporters. Critics also flag data exclusivity clauses, which could delay affordable generic drugs in India, raising healthcare costs and regulatory burdens.
Politically, the FTA has sparked unease. In the UK, opposition figures like Kemi Badenoch criticize the DCC, arguing it disadvantages British workers by exempting Indian professionals from National Insurance contributions. In India, farmers and MSMEs protest, fearing competition from tariff-free UK imports could harm local industries.
The absence of a finalized Bilateral Investment Treaty (BIT) leaves investment protections unresolved, tempering the deal’s long-term economic security.
The Bigger Picture: A Deal of Promise, Not Perfection
The Indo-UK FTA is a bold step, but its success hinges on implementation. Both nations must address non-tariff barriers, clarify ambiguous provisions, and support SMEs to maximize benefits. For India, aligning domestic policies like the PLI scheme with FTA incentives is critical to boosting exports. For the UK, navigating CBAM and BIT talks will determine whether the deal truly delivers on its economic promise.
While it strengthens the India-UK Comprehensive Strategic Partnership, it’s not a cure-all for global trade volatility or domestic economic woes. It’s a deal that says, “We believe in each other,” but belief alone won’t bridge the gaps.
This FTA is a pragmatic move in a protectionist world, but it’s no revolution. Both nations must temper expectations, address unresolved issues, and invest in execution to turn rhetoric into reality. For now, it’s a foundation—not a finish line.