India-UK FTA Finalized After Three Years of Negotiations

India and the UK finalized a landmark trade deal on May 6, 2025, following three years of intense negotiations. The multi-billion-pound agreement, which reduces tariffs on 90 percent of traded goods, aims to bolster both economies amid the ongoing global trade challenges.

India’s Prime Minister Narendra Modi and UK Prime Minister Keir Starmer formally announced the successful conclusion of the India-UK Free Trade Agreement (FTA), marking a major milestone in their bilateral trade relationship.

Upon the finalization of the FTA on May 6, 2025, the UK government announced that the new trade agreement is projected to boost annual bilateral trade between India and the UK by £25.5 billion.

Modi took to social media platform X (formerly known as Twitter), stating the agreement will strengthen the Comprehensive Strategic Partnership between India and the UK while promoting economic growth, investment, job creation, and innovation in both economies.

Top highlights of the India-UK FTA

• Zero-duty market access: Approximately 99 percent of Indian exports will enjoy zero-duty access to the UK market, enhancing export competitiveness.
• Tariff reductions for Indian imports: Import duties on 90 percent of tariff lines will be reduced, with 85 percent of these becoming completely tariff-free over the next 10 years, offering notable savings for Indian consumers and businesses.
• Lower tariffs on key UK exports: India has agreed to lower tariffs on a range of high-value British exports, including whisky, medical devices, advanced machinery, and lamb, making these products more competitive in the Indian market.
• Reduced costs for Indian consumers: The agreement cuts import duties on a wide range of products, including cosmetics, aerospace components, medical equipment, salmon, electrical machinery, soft drinks, chocolates, and biscuits, potentially lowering consumer prices in India.
• Affordable British imports: UK consumers will benefit from reduced costs on popular Indian imports such as clothing, footwear, and various food items, including frozen prawns.
• Automotive tariff reductions: Tariffs on automobiles will drop significantly, from over 100 percent to 10 percent under a special quota system, reducing costs for UK automakers exporting to India.
• Social security savings: Indian professionals working temporarily in the UK will benefit from a three-year exemption from social security contributions, reducing the financial burden for both employees and employers.
• Expanded export opportunities for key sectors: The agreement is expected to boost exports from India’s labor-intensive sectors, including textiles, marine products, leather, footwear, sports goods, toys, gems and jewelry, engineering goods, auto parts, engines, and organic chemicals, creating new business and employment opportunities.

Social security savings for Indian workers in the UK

One of the biggest highlights of the India-UK FTA includes crucial provisions to promote workforce mobility, reduce costs for businesses, and create significant employment opportunities in both countries.

The two countries formally announced the conclusion of the Double Contribution Convention alongside their FTA. This pact is intended to eliminate the requirement for Indian professionals on short-term assignments in the UK to pay double social security contributions. It addresses a long-standing demand from Indian businesses seeking to reduce the financial burden associated with deploying skilled professionals abroad.

Currently, Indian professionals working temporarily in the UK are required to make mandatory National Insurance (NI) contributions, which can cost approximately £500 per employee each year, in addition to other taxes and healthcare charges. However, these professionals often do not benefit from these contributions, as they typically return to India once their assignments are complete.

Workforce mobility and employment growth

The FTA is expected to create substantial employment opportunities in high-growth sectors such as manufacturing, technology, and professional services. It aims to facilitate the movement of skilled professionals, making it easier for business visitors, investors, intra-corporate transferees, and independent professionals, including yoga instructors, musicians, and chefs, to work across borders. This streamlined mobility is further expected to strengthen economic ties, support diverse professions, and enhance the overall business environment.

Additionally, Indian professionals in digital sectors such as architecture, engineering, computer services, and telecommunications will benefit from improved access to the UK market. Under the new terms of agreement, professionals will have advantages in these industries.

India excludes key sectors from tariff cuts in the FTA

In the newly finalized FTA with the UK, India has excluded several industrial products—such as diamonds, silver, smartphones, and optical fibers—from tariff concessions, as per media reports. Furthermore, duty relief on imports of petrol and diesel vehicles will be restricted to a fixed quota, while electric vehicle (EV) concessions will be capped at a few thousand units.

Key items placed on the exclusion list include plastics, base stations, television camera tubes, and related components, indicating India’s strategic protection of certain industries. For ICE (internal combustion engine) vehicles, duty reductions will be phased in gradually to shield domestic manufacturers.

The finalized deal aims to ease UK access for products like luxury cars. Automotive tariffs will fall from over 100 percent to 10 percent under quota limits, benefiting firms like Tata Motors and its subsidiary Jaguar Land Rover.

Despite strong EV growth in India—with April 2025 sales up 56.87 percent year-on-year to 12,233 units—imports from the UK remain limited, totaling just US$2.75 million in 2024. Premium UK brands like Bentley and Rolls-Royce cater to a niche market.

India has also reportedly opted for a phased reduction of duties on other sensitive items, including ceramics, petroleum products, chemicals, aircraft engines, and engineering equipment. 

India-UK trade dynamics

The India-UK FTA comes at a time of strong bilateral trade, with current merchandise trade valued at around US$21.3 billion. In FY 2023-24, India recorded a trade surplus with the UK, exporting goods worth US$12.92 billion against US$8.41 billion in imports.

Source: Department of Commerce, Ministry of Commerce and Industry, GoI.

CLICK HERE: India’s FTA Updates 2025

Both countries have set a target to reach a total trade target of US$120 billion by 2030. The deal spans multiple sectors, including goods, services, and technology, aiming to support sustainable and inclusive economic growth, build resilient supply chains, and create high-quality jobs in India.

Past FTA negotiations between India and the UK

Negotiations for an FTA between India and the United Kingdom began in January 2022, marking an important step in the UK’s independent trade policy following Brexit. However, the talks experienced intermittent progress, partly due to political transitions in the UK, which saw four different prime ministers in office during this period, as well as national elections in both countries in 2024.

After the Labour Party came to power in July 2024, the UK swiftly moved to finalize the agreement, resuming negotiations with India in February 2025. The deal was concluded following a series of intensive discussions between the trade ministers of both countries in London on April 28-29, 2025.

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