India-UK Free Trade Agreement: Key Highlights & Impact

August 25, 2025

After nearly three years of negotiations, India and the United Kingdom finalized a historic Free Trade Agreement (FTA) on May 6, 2025. This comprehensive agreement, the first of its kind between India and a developed Western economy post-Brexit, marks a significant milestone in bilateral relations. The FTA aims to bolster economic ties by eliminating or reducing trade barriers, encouraging investments, and promoting services trade.

The deal is expected to double bilateral trade by 2030, offering substantial opportunities for Indian exporters, professionals, and investors. We bring you this focused newsletter summarizing key provisions and their likely impact.

1. Tariff Reductions – Exporters and Importers Take Note

Key Provisions:

• India to eliminate tariffs on 99% of UK exports, particularly industrial and value-added goods.
• UK to remove duties on 90% of Indian goods, with 64% of tariff lines going duty-free on day one.
• High-duty UK goods like Scotch whisky, automobiles, chocolates, and cosmetics to benefit from phased reductions.

Sectoral Impact:

• Textiles & Apparel: Lower tariffs will boost competitiveness of Indian textile products in the UK.
• Automotive Components: Reduction of duties will benefit Indian manufacturers integrating into UK supply chains.

2. Services Sector Liberalisation – A Game Changer

Key Provisions:

• Market access commitments for Indian IT, legal, financial, and educational services
• Mutual Recognition of Professional Qualifications (MRPQ) – accounting, architecture, law
• Visa relaxations and facilitated mobility for:
  • Intra-corporate transferees
  • Independent professionals
  • Contractual service providers
  • Cultural professionals (e.g., chefs, yoga instructors, musicians)

Strategic Relevance: Indian skilled professionals gain increased access to the UK market, encouraging joint ventures and direct presence.

3. Social Security Coordination – Lower Cost of Assignments

Key Provision: Bilateral exemption from dual social security contributions for posted workers (up to 3 years).

Impact: Substantial savings on payroll costs for Indian employers and UK businesses during temporary assignments.

4. Digital Trade & Intellectual Property

Digital Trade Commitments:

• Free cross-border data flow with strong data protection
• E-signature recognition, paperless trading, fintech & e-commerce support

Enhancements:

• Extension of copyright term in India from 60 to 70 years.
• Enhanced enforcement mechanisms.

Implication:

• Encourages tech startups and exporters relying on digital delivery models.
• Provides a framework for smoother IP protection in both markets.

5. Customs Cooperation and SME Support

• 48-hour customs clearance target for perishable and time-sensitive goods.
• Creation of a Trade Committee and SME Chapter for dispute resolution and capacity building.
• Greater access to Indian government procurement markets.

Implication:

• Faster logistics and dispute resolution make exports/imports more viable for smaller players.
• UK SMEs can bid for public tenders in India, and vice versa.

6. Strategic and Political Significance

• India becomes UK’s first FTA partner among major developing economies.
• Reinforces India’s stature as a global manufacturing and services hub.
• Post-Brexit, the UK sees India as a key strategic trade ally in the Indo-Pacific.

Conclusion: Preparing for the Opportunities Ahead

This FTA marks a transformational moment for Indo-UK economic relations, offering deep benefits across trade, investment, services, and mobility. Businesses in sectors such as textiles, IT, auto-components, spirits, education, and finance are likely to see tangible advantages.

Action Points for Clients:

• Assess the impact of duty reductions on your products and inputs.
• Explore entry or expansion into the UK market under favourable conditions.
• Evaluate employee mobility plans in light of social security savings.
• Revisit IP protection and digital business models to align with new norms.