On July 24th, India and the United Kingdom signed a historic Free Trade Agreement (FTA) that looks set to provide a boost to both economies. Negotiations began in January 2022 and concluded in principle on May 6, 2025, with the final signing taking place on July 24, 2025.
The Comprehensive Economic and Trade Agreement (CETA) is India’s first major bilateral FTA with a developed economy. It is widely seen as one of the most detailed post-Brexit trade deals for the UK, and is an important milestone in bilateral economic ties.
Key highlights and takeaways
In 2024, India ranked as the UK’s 11th largest trading partner, making up 2.4% of the UK’s total trade. The overall trade in goods and services between the two nations reached nearly $57 billion that year, and with the new FTA in place, this number will likely grow in the years ahead.
CETA offers unprecedented duty-free access to 99% of India’s exports to the UK, accounting for nearly 100% of trade value. This includes key labour-intensive sectors like textiles, leather, marine products, gems and jewellery, and toys, along with high-growth areas like engineering goods, chemicals, and auto components. The move is expected to drive significant job creation, especially empowering artisans, women-led businesses, and MSMEs.
- Tariffs have been eliminated on 99% of India’s exports to the UK, effectively covering nearly 100% of the trade value.
- Tariffs on products like marine goods, textiles, leather, and processed foods have been reduced from as high as 70% to zero.
- UK markets will now open up duty-free access for almost all Indian agricultural exports, with a few exceptions, benefitting the Indian agriculture sector.
- The agreement includes services commitments across critical sectors such as IT, finance, education, healthcare, and other high-value industries.
- Mobility provisions have been improved to ease the entry of business visitors, professionals, and intra-corporate transferees between the two countries.
- The UK will permit 1,800 Indian chefs, yoga instructors, and artists to work annually under contractual service quotas.
- The Double Contribution Convention will prevent double social security payments, exempting Indian workers and their employers from paying UK social security contributions for up to three years when on temporary assignments. This will benefit Indian companies and workers by saving them over ₹4,000 crore.
Consumers stand to benefit from greater product variety, reduced prices, and enhanced digital trade protections.
The deal also includes a broader India–UK Vision 2035 agreement on trade, technology, climate and more. According to the Vision 2035 agreement, India and the UK will build an intellectual partnership that embraces emerging opportunities, keeps pace with technological progress, and deepens cooperation in education and research. This collaboration aims to develop a skilled, future-ready talent pool equipped to tackle global challenges and drive a safe, sustainable future.
Beyond goods, the agreement encompasses a broad range of services — a core pillar of India’s economy. It covers IT and IT-enabled services, finance, professional services, business consulting, education, telecom, architecture, and engineering, opening up high-value opportunities and boosting employment. With India’s services exports to the UK surpassing USD 19.8 billion in 2023, CETA may accelerate this growth further.
Indian consumer POV: What becomes cheaper?
The FTA will drastically reduce tariffs on several British goods entering the Indian market, with average tariffs to fall from 15% to just 3%. This makes premium British goods more affordable for consumers in India.
- Whiskey: A major highlight of the deal is the reduced the import duty on whiskey, which has been slashed from 150% to 75% (and then to 40% in a decade). While this does lower the price of whiskey, state and local taxes in India may cap the final retail reduction at under 10%.
- Automobiles: The tariff on British-made cars will fall from 100% to 10% under a quota-based system, making luxury vehicles more affordable. However, quotas will limit volume, and high local taxes will still apply.
- Cosmetics & personal care: Import duties on UK-manufactured skincare and cosmetic products will be reduced, which will encourage more premium brands to set up shop in India.
Medical Devices: UK-made medical equipment will face lower import duties, making advanced healthcare tools more accessible and affordable across India’s healthcare sector.
- Food products: British food and beverage favourites like chocolates, soft drinks, biscuits, and salmon will become more affordable in India, paving the way for a broader presence in supermarkets and kitchen shelves.
Indian producers’ and exporters’ POV: What are the benefits?
Doing business with the UK will become simpler for Indian industry now. 99% of Indian export lines will now be duty-free in the UK, spanning textiles, apparel, leather, gems & jewellery, engineering goods, pharma, processed foods, marine products, spices, and more. Several labour-intensive sectors like textiles, marine, base metals and chemicals will enjoy zero duties, down from 20% duties prior to the FTA. Here’s a closer look.
Simplified rules of origin: The agreement eases compliance by allowing exporters to self-certify product origin, significantly reducing paperwork and processing time. UK importers can also use importer knowledge for certification, further streamlining trade procedures. And for smaller consignments under the £1,000 mark, no origin documentation is required, which benefits small businesses and e-commerce. Plus, Product Specific Rules of Origin (PSRs) under the FTA are aligned with India’s existing supply chains in key sectors like textiles, machinery, pharmaceuticals, and processed food, ensuring smooth implementation.
Services and mobility boost: The service sector forms a cornerstone of India’s economy, and the agreement enhances market access in key areas such as IT, financial services, education, and healthcare. It also establishes a structured framework for the temporary movement of professionals, enabling business visitors, contractual service providers, and independent professionals to enter the UK under clear, predictable entry rules. The UK will also allow up to 1,800 Indian chefs, yoga instructors, and classical musicians to work in the country annually, further strengthening cultural and professional exchange.
Sectors in focus: The India–UK FTA delivers a major boost to several key Indian export sectors through substantial tariff eliminations.
- Textiles and apparel: UK import duties of 8–12% have been removed, enhancing the global competitiveness of Indian garments, home textiles, knits, and ready-made clothing, especially against rivals like Bangladesh and Vietnam.
- Leather and footwear: Exporters from traditional hubs like Kanpur, Agra, and Chennai gain a sharp edge as duties of up to 16% are scrapped, directly benefiting MSMEs.
- Gems and jewellery: Immediate zero-duty access to the UK’s multi-billion-dollar market, which is expected to double India’s exports, currently valued at around $941 million, within just a few years.
- Engineering goods and auto components: Tariffs have been phased out across more than 1,600 tariff lines covering machinery, parts, and tools, setting the stage for exports to nearly double to $7.5 billion by 2030.
- Pharmaceuticals and medical devices: Zero tariffs on generics and surgical instruments, with the added advantage of UK recognition of compliant Indian testing, enhancing India’s ability to expand in the British healthcare market.
- Agriculture, processed foods, and marine products: Items like spices, tea, basmati rice, shrimp gain duty-free access, reinforcing India’s presence in the UK’s premium and specialty food segments.
MSMEs, in particular, benefit from faster customs clearance, paperless trade, and better UK supply chain integration.
A strategic alliance
On the face of it, the India-UK FTA has been negotiated strategically and helps open up new markets for segments of exports which may lose business in the US, especially after Donald Trump’s latest move of 25% tariffs with India effective August 1st, 2025. It also marks a pivotal shift: consumers in India get access to select UK goods at lower cost, while Indian businesses — especially in labour-intensive and export-heavy sectors — gain near-complete duty-free access to the UK market.
What needs to be kept in mind is that while Indian consumers will see reduced import duties on select UK products like whiskey, cosmetics, and cars, the actual drop in retail price may not be that significant because of a complicated, multi-layered domestic tax regime. Indian exporters/businesses though are set to gain a competitive advantage with zero tariffs, streamlined regulations, and better market access across key sectors including textiles, leather, pharmaceuticals, machinery, and food products.
Overall, the FTA aligns with India’s broader goals to boost manufacturing, generate employment, and deepen integration with advanced global markets.
Sources
Key wins from UK-India trade deal – investments, jobs, exports
FT: India clinches strategic trade deal with UK
India Briefing: India Signs Historic Trade Deal with UK: What It Means for the Two Economies
WE Forum: UK-India Free Trade Deal
Reuters: Britain and India sign free trade pact during Modi visit