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The India-UK free trade agreement (FTA), officially called the Comprehensive Economic and Trade Agreement (CETA), which was signed on Thursday, is touted to be a “landmark” deal that will significantly improve market access and boost bilateral trade by as much as USD 34 billion annually, said an official statement by the British government.

UK Prime Minister, Keir Starmer has called it “a major win for Britain”, especially after the UK left the European Union. 

It is the UK’s biggest such agreement since Brexit, and India’s first with a European economy. 

“It will create thousands of British jobs across the UK, unlock new opportunities for businesses and drive growth in every corner of the country, delivering on our ‘Plan for Change’,” Starmer said.

 

Also Read: India, UK to sign free trade agreement in London on Thursday

India’s Commerce and Industry Minister, Piyush Goyal, posted on X: “Duty-free access for about 99 per cent of Indian exports unlocks nearly USD 23 billion in opportunities for labour-intensive sectors, marking a new era for inclusive and gender-equitable growth.”

"The deal will also have a transformative impact on manufacturing-intensive sectors like engineering goods, electronics, pharma, chemicals, food processing, and plastics. This agreement will also provide Indian consumers high quality goods at competitive prices," he added.

While the UK already imports goods from India worth about 11 million pounds, liberalisation of tariffs will improve the Indian consumers’ access to British products like whiskey, gin, soft drinks, cosmetics, cars and medical devices as average tariffs drop from 15 per cent to 3 per cent.

Under the FTA, 99 per cent of Indian exports will face zero duties in the UK, while Britain’s exports to India will see a 90 per cent cut in duties, with most goods becoming fully tariff-free within a decade.

The UK government said the pact will “significantly improve market access for businesses in both countries, leading to cheaper products and services for consumers”.

Effect on Indian agriculture sector

Opening up India’s markets to British consumers, the FTA is being hailed as an agriculture-boosting initiative that will offer a wider export base to the country’s high-value products like vegetables, fruits, basmati rice, cereals, animal products, beverages, oil seeds and dairy, officials said.

The deal, the negotiations for which restarted three years ago after a long gap, is expected to ensure comprehensive market access for Indian goods across a wide array of sectors – notably agriculture, pharmaceuticals, textiles, food processing, chemicals, engineering goods, and marine products – as it supports India’s ambitious goal of achieving USD 100 billion in agri exports by 2030.

Duties on India’s key labour-intensive sectors have been reduced to zero from previous high levels of 20 per cent on marine products, 12 per cent on textiles and clothing, 8 per cent on chemicals, and 10 per cent on base metals, the officials further informed.

In the processed food sector, tariffs have been slashed on almost 99.7 per cent of product lines from as high as 70 per cent to zero.

There is room for higher export of Indian agricultural products to the UK since the latter imports just USD 811 million from India from a total of USD 37.52 billion imported globally. India exports USD 36.63 billion agri-products globally.

India’s niche agri-products such as tea, mangoes, grapes, spices, and marine products etc. are highly valued in the UK markets, which the India-UK FTA will boost. 

Indian farmers can expect to fetch premium prices for these products in the UK market, all thanks to the trade pact that will deliver a “seismic shift”, officials said, adding that Indian agri-products will gain parity with major EU exporters like Germany and Netherlands, which enjoy zero tariffs.

Pharmaceuticals and medical devices to get a boost

Also benefitting by the trade agreement is the Indian pharmaceutical sector, its generic medicines, as well as medical devices including X-Ray machines and surgical instruments, which will all be exported on zero duty.

“A significant share of medical devices like surgical instruments, diagnostic equipment, ECG machines, and X-Ray systems will not attract any duty,” said a commerce ministry official, adding that it will help reduce costs for Indian med-tech companies, thereby making their products more competitive in the UK market.

“Given the UK’s shift away from reliance on Chinese imports post-Brexit and COVID-19, Indian manufacturers are poised to emerge as a favoured, cost-effective alternative, especially with zero-duty pricing for medical devices,” the official said.

The pact’s zero tariff provisions are also expected to increase the sales of Indian generic medicines in the UK market – India’s largest pharmaceutical export destination in Europe. 

The pharma sector has only 56 tariff lines, which represents 0.6 per cent of the total pact, officials further shared. However, the pharmaceutical sector holds strategic importance when it comes to global trade.

The Indian pharmaceutical industry is the world’s third largest by volume and 14th largest in terms of value.

India exports USD 23.31 billion globally, and the UK imports nearly USD 30 billion. Since Indian pharma accounts for under USD 1 billion, there is significant headroom for growth.

In FY 2024-25, Indian pharmaceutical exports rose 10 per cent year-on-year to USD 30.5 billion.

The sector has seen a shift over the last 30 years to become a leader in the manufacture of high-quality generic drugs at competitive prices, putting India in the No. 1 spot as the largest supplier of generic medicines.

The country has a 20 per cent share in the global supply as it manufactures 60,000 different generic brands across 60 therapeutic categories. 

Indian products are shipped to over 200 countries around the globe, with Japan, Australia, West Europe and the US as the main destinations.

The current market size of the medical devices sector in India is estimated to be USD 11 billion and expected to reach USD 50 billion by 2030. 

Tariff exclusions

With India fiercely protecting its farmers in trade pacts, having not opened its agriculture sector in any trade deal with any country so far, the India-UK trade pact excludes dairy products, edible oils, and apples. 

Apart from these, the UK has secured zero duties on 95 per cent of agriculture and processed food items including fruits, vegetables, cereals; pickles, spice mixes, fruit pulps; and ready-to-eat meals and processed foods.

However, no tariff concession has been allowed on oats.

On the other hand, Indian staples like turmeric, pepper, cardamom; processed goods like mango pulp, pickles, and pulses; and marine products such as shrimp and tuna will enjoy duty-free access in the UK market.

The FTA would also give a boost to exports of emerging products such as jackfruits, millets, and organic herbs.

The FTA also provides for zero-duty access for 99 per cent of exports, including shrimp, tuna, fishmeal, and feeds which are currently taxed in the range of 4.2-8.5 per cent.

“Despite the UK’s USD 5.4 billion marine import market, India's share remains at just 2.25 per cent, underscoring a significant untapped export opportunity,” an official of the commerce ministry said.

The FTA would also help India's export of high-margin branded products like coffee, spices, beverages, and processed food.

With the UK already consuming 1.7 per cent of India's coffee, the pact further boosts export of India’s high-margin branded products like coffee, spices, beverages, and processed food.

The UK is also a major buyer of Indian tea – importing 5.6 per cent from India – while spices see an export of 2.9 per cent. Zero tariffs will further enhance the country’s share.

The pact also allows for certain products, such as Indian craft drink feni from Goa, artisanal wines from Nashik, and toddy from Kerala, to enjoy Geographical Indication (GI) protection and shelf space in high-end UK retail and hospitality chains.

Artisans, weavers, and daily-wage labourers employed in several MSMEs across textiles, leather, footwear, gems and jewellery, toys, and marine products will step into a new phase of prosperity, the official said.

India’s exports to the UK rose by 12.6 per cent to USD 14.5 billion, while imports grew by 2.3 per cent to USD 8.6 billion in 2024-25.

The bilateral trade between India and the UK increased to USD 21.34 billion in 2023-24 from USD 20.36 billion in 2022-23.

Furthermore, duty on engineering goods has been slashed from 18 per cent to zero, making it possible for engineering exports to the UK to double in the next five years, reaching over USD 7.5 billion by 2029-30.

The engineering goods sector has the highest share among the listed sectors with 1,659 tariff lines, making up 17 per cent of the total.

India's global engineering exports are USD 77.79 billion, while the UK imports USD 193.52 billion worth of such products, yet only USD 4.28 billion comes from India, signalling strong potential for expansion.

UK-India Vision 2035

Prime Minister Modi and Starmer have unveiled the ambitious ‘UK-India Vision 2035’, a roadmap that marks a new beginning in the partnership of the two countries in not only trade, but also defence cooperation, technology and energy.

The new ‘defence industrial roadmap’ will provide for “securing borders, tackling climate change and nurturing educational connections,” said UK government officials.

British Foreign Secretary, David Lammy, said the roadmap will mention “clear goals and milestones” across a range of areas such as defence, technology and energy and further build on the FTA “to unlock new opportunities that strengthen defence cooperation and drive innovation between both economies”.

“The UK is thrilled that Prime Minister Modi is visiting to sign the FTA, the most significant bilateral trade deal for Britain since leaving the European Union (EU) and the most comprehensive agreement India has ever signed,” he said earlier in the day.

The roadmap is projected to increase UK GDP by 4.8 billion pounds, and raise wages by 2.2 billion pounds annually in the long term.

Highlighting the introduction of new areas of cooperation such as advanced technologies, critical minerals, and green finance in the roadmap, Lammy said it will establish more robust mechanisms for delivery in areas where both countries already work together.

“Building on the trade deal, together, this new work plan will see us unlock new opportunities for bilateral trade and investment to thrive, strengthen our defence cooperation, and work together to drive innovation and shape the technologies of tomorrow. We will also accelerate our joint efforts to tackle climate change along with nurturing the next generation of global talent through our education and skills partnership,” he said.

“It will ensure our partnership remains not only relevant and transformative but focused on the challenges of the future. And we’ll review this vision annually, ensuring the partnership remains dynamic, aligned, and responsive to rapid global change,” he added.

Tackling cybercrime, terrorism, climate change together

Terming India as a “pivotal partner” of the UK in the Indio-Pacific and the Indian Ocean region, Lammy said the two countries are committed to aligning for a free, open, and secure region.

“India is the emerging superpower of the 21st century, the largest country in the world with 1.4 billion people and the fastest growing major economy in the world. Through Vision 2035, and the trade deal, the UK is in the best position to partner with India over the next decade,” stressed Lammy.

“This includes through increased defence cooperation, strengthening our ability to tackle shared threats like terrorism and cybercrime, whilst promoting peace and security in the Indo-Pacific and beyond,” he said.

Saying India’s choices on climate and growth affect the globe since it is the world’s most populous country, Lammy justified supporting India in its green transition. 

“It helps protect the world’s most vulnerable, advances the Sustainable Development Goals (SDGs), and contributes to UK priorities like economic growth, trade, and national security,” he added.

PM Modi was hosted by Starmer for wide-ranging talks at his Chequers countryside retreat in Buckinghamshire, south-east England, on Thursday.