“Tariff Cuts, Market Access, and Strategic Collaboration Set to Drive Multisectoral Growth”
In a historic move set to strengthen bilateral ties, the United Kingdom and India have officially signed a Free Trade Agreement (FTA), which is expected to increase bilateral trade by over £25.5 billion by 2040. This agreement marks a pivotal moment in post-Brexit UK trade policy, positioning India as one of the UK’s most important trading partners. The FTA aims to benefit a wide array of sectors, from small businesses to large multinational corporations, with India poised to gain significant economic advantages.
India’s micro, small, and medium enterprises (MSMEs), which contribute nearly 30% to the country’s GDP and employ over 110 million people, stand to gain substantially from this agreement. The deal significantly reduces or eliminates tariffs on a wide range of Indian exports, including textiles, food products, leather goods, and light manufacturing. With 99% of Indian goods entering the UK duty-free, MSMEs will find new opportunities to compete in the UK market, previously burdened by high tariffs and complex regulations. Moreover, the inclusion of service-sector provisions means Indian professionals can access the UK market more easily, fostering growth in sectors like IT, education, wellness, and creative arts.
India’s economy, which is already one of the fastest-growing in the world, is expected to see an influx of around ₹40,000 crore annually by 2030 as a result of the FTA. This deal not only boosts India’s exports but also strengthens the domestic manufacturing sector, with an increased flow of UK technology, machinery, and high-end raw materials. These factors will help elevate India’s industrial output, particularly in areas like automotive, aerospace, and pharmaceuticals. Additionally, the agreement is expected to attract foreign direct investment (FDI) into India’s infrastructure, manufacturing, and green energy sectors, areas where the UK has significant expertise. British businesses are likely to view India as a more attractive investment destination, further cementing economic ties between the two countries.
Several industries in India stand to gain the most from this trade agreement. The FMCG sector, in particular, is set to benefit from the removal of tariffs on high-quality British packaging materials, cosmetics ingredients, and other consumer goods. British companies, meanwhile, can tap into India’s burgeoning middle class, expanding their footprint in tier-1 and tier-2 cities. Similarly, India’s paints and coatings industry, both in decorative and industrial segments, will see benefits from the lower cost of specialized chemicals and pigments sourced from the UK. These reduced input costs can enhance the competitiveness of Indian products, both domestically and in global markets.
Chemicals are vital to a broad range of Indian industries, from agriculture to automotive. The trade deal will provide Indian manufacturers with easier access to specialized chemicals from the UK, improving the quality and cost-effectiveness of Indian production. India’s pharmaceutical sector, one of the world’s largest exporters of generic medicines, will also benefit from reduced tariffs on high-end raw materials and easier access to the UK’s National Health Service (NHS) procurement channels. This deal opens up new export opportunities and strengthens the long-standing relationship between the two countries in the pharma sector. The automotive sector, led by companies like Tata Motors’ Jaguar Land Rover, will gain from tariff reductions on vehicle components and parts. Similarly, the aerospace sector will benefit from closer ties in research and technology transfer, particularly in electric vehicles and advanced aerospace components.
While the deal has been hailed as a victory for economic cooperation, it has also sparked some controversy. Critics, including some UK political figures, argue that the deal could lead to the undermining of British workers’ wages due to provisions that allow Indian professionals to work in the UK under relaxed visa rules. Additionally, some fear that the influx of cheaper imports from India could harm UK manufacturers. On the Indian side, there are concerns that the flood of British goods could create competition for local businesses, especially in the FMCG and textile sectors.
Despite these concerns, both India and the UK view the trade deal as a strategic win. For the UK, the agreement represents a major step in rebuilding trade ties post-Brexit and diversifying its economy beyond the European Union. For India, the deal is a key step in further opening global markets to its exports and positioning itself as a critical player in the international economy. As the global economy continues to navigate challenges such as rising protectionism and geopolitical tensions, the UK-India FTA offers a model for cooperation that prioritizes open markets and mutual growth.
The UK-India Free Trade Agreement holds significant promise for both nations, particularly in terms of trade volume, industry growth, and economic resilience. The deal not only benefits large-scale manufacturers but also positions MSMEs to thrive in an increasingly globalized market. As India’s export sector gains access to key British markets and UK companies expand their presence in India, this partnership will drive economic growth and foster innovation in both countries. As the two nations move forward with this historic trade agreement, the broader global community will be watching closely to see how this new economic model unfolds. Both India and the UK stand to benefit from this strategic partnership, shaping a more connected and prosperous future in the world economy.