As concerns rise over the global trade environment following new US tariff measures, the India-UK Free Trade Agreement (FTA) is being viewed as a timely buffer, particularly for labour-intensive sectors. Economist Dipanwita Mazumdar has said the agreement could help cushion India’s economy against the impact of protectionist headwinds.
Speaking to ANI, Mazumdar noted that the pact also signals India’s deepening engagement with global supply chains. “India-UK trade deal is also a testimony of India’s footsteps towards integrating in global supply chain. The fine print of the details is positive in terms of employment generation,” she said.
The recently signed FTA is expected to boost export-linked employment in sectors such as textiles, leather, gems and jewellery, chemicals, fish products, and automobiles. The automobile industry, in particular, could benefit from lower tariffs under the deal.
“Overall attempts by India to strike parallel deals in an uncertain global policy space is welcoming,” Mazumdar observed.
While the International Monetary Fund (IMF) has raised India’s GDP growth projection to 6.4 per cent for 2025 and 2026, questions remain over the potential drag caused by the United States’ latest tariff impositions. US President Donald Trump’s 25 per cent tariff hike has yet to be detailed in terms of effective sectoral rates, leading to uncertainty among exporters.
Also read: 'India will lose ₹4,060-cr revenue in 1st year of UK trade pact'
Mazumdar estimated that a 10 per cent decline in India’s exports to the US could shave 0.2 per cent off India’s GDP growth. However, she argued this could also spur Indian exporters to diversify markets, particularly across South-East Asia.
“This should be read with caution as it also opens opportunities for India to integrate strongly in global supply chain and gain higher market share,” she said.
She flagged short-term vulnerabilities for Indian exports in pharmaceuticals, gems and jewellery, auto components, and textiles, owing to their heavy dependence on the American market. “This may be bit challenging as India’s manufacturing sector has seen modest recovery in recent times,” she cautioned.
However, Mazumdar remained optimistic that enhanced competitiveness in labour-intensive industries could offset the pressure. “We expect Government to come up with more such measures,” she added.
On global monetary policy, Mazumdar commented on the US Federal Reserve’s recent decision to hold rates steady between 4.25 and 4.50 per cent, attributing the pause to inflation risks stemming from tariff tensions.
“We believe unless there is some certainty on tariff rates among major trading partners of USA, policy decision by the Fed will be wait and watch approach,” she remarked.
Domestically, she said the Reserve Bank of India (RBI) was likely to maintain a data-dependent stance in its August meeting. The central bank, she noted, had already frontloaded its rate adjustments.
Follow us
