India and the United Kingdom (UK) announced the conclusion of a Free Trade Agreement (FTA) after three years of formal talks. Both countries also agreed to negotiate a reciprocal Double Contributions Convention (DCC).

DCC is a type of Social Security Agreement. o It will support business and trade by ensuring that employees moving between both countries and their employers, will only be liable to pay social security contributions in one country at a time. It will include employees temporarily working in the other country for up to 3 years.

Key Highlights of the India-UK Free Trade Agreement (FTA)

The India-UK FTA brings several direct and indirect benefits, making it a win-win for both countries and unlocking new opportunities.

Benefit	Description	Example
Enhanced Market Access	India gains zero-duty access to UK markets for industrial and agricultural goods; UK exporters get reduced tariffs in India.	Indian processed foods earlier faced 10–12% tariffs — now duty-free in the UK. Tariffs on British whiskey reduced from 150% to 40% over 10 years.
Boost to Key Domestic Sectors	Labour-intensive Indian sectors like textiles, apparel, toys, and footwear benefit; UK gains in automobiles and spirits.	Indian apparel now gets zero-tariff access to UK. Tariffs on British cars slashed from 100% to 10%.
Job Creation & Economic Growth	Trade expansion leads to employment generation and investment in both countries.	India’s textile sector, employing 45+ million people, can boost jobs through increased exports.
Diversification of Trade Partners	India reduces dependency on US/EU; UK diversifies beyond EU post-Brexit.	India currently holds just 1.8% share in UK imports — FTA targets major increase.
Foundation for Future FTAs	Sets a model for India’s trade negotiations with other major economies like the EU and US.	Learnings from tariff cuts and ESG compliance can aid future deals with EU/US.

Key Indian Beneficiaries of the India-UK FTA

Following are the sectors that expect to gain directly from the new trade agreement.

Engineering Export Sector: Expects exports to double due to tariff elimination. EEPC projects $7.55 billion by 2029-30.
Textile & Apparel Industry: Gains edge over Bangladesh/Vietnam with zero-duty access.
Gems & Jewellery Sector: Duty-free exports boost margins on gold and diamond products.
IT & Professional Services: Easier professional mobility and recognition of qualifications.
Indian Employers in the U.K.: Save on social security costs for Indian talent on temporary duty.

Concerns of Indian Farmers Regarding the FTA

While industry celebrates, farmers have voiced legitimate concerns about import competition.

Threat from Cheaper Agri-Imports: U.K. lamb, salmon, and dairy may undercut Indian produce. Eg: Lower-cost U.K. lamb hits local meat producers.
Low-Income Farming Risk: Indian small-scale farmers can’t compete with subsidised imports. Eg: Marginal farmers vulnerable to price crashes.
Lack of Safeguards: No quotas or countervailing duties announced. Eg: Sudden import surges could hurt local markets.
High Production Costs in India: Indian farmers face higher input costs which makes their products less competitive.
Absence of Adjustment Mechanisms: No phased liberalization or protection clauses to give farmers adjustment time.

Implications of the India-UK FTA on India’s future FTAs

The India-UK FTA could serve as a template and test case for future negotiations.

Template for Future FTAs: May influence India’s trade talks with EU and U.S. Eg: Liberalisation on 85% of U.K. imports could raise similar asks.
Sensitive Sector Precedents: Agriculture and alcohol tariff cuts may open the door for more. Eg: U.S. bourbon or EU wine exporters may demand similar access.
Manufacturing Sector Pressure: Greater market openness requires stronger industrial policies. Eg: Indian manufacturing, already weak globally, may face exposure.
Model for Services Negotiations: The services component may guide India’s future demands in professional mobility.
Balancing Atmanirbhar Bharat Goals: India must ensure that opening trade does not contradict its domestic self-reliance agenda.

Way Forward

Targeted reforms and long-term strategies are needed to make Indian textiles globally competitive, sustainable, and future-ready.

Reform Tax Structure & Boost Incentives: Rationalize the GST structure to eliminate the inverted duty issue and offer production-linked incentives (PLI) for MMF textiles to enhance global competitiveness.
Invest in R&D and Modern Manufacturing: Encourage investment in high-performance MMF fabric production, innovation, and compliance infrastructure to meet international standards in technical textiles and sustainability.
Develop Global Design Ecosystem: Build strong global collaborations with design houses and brands to integrate India into high-end global supply chains.
Expand Export Promotion Councils’ Role: Strengthen market intelligence, branding, and global promotion efforts through institutional support.
Enhance Logistics & Supply Chain Efficiency: Improve port, road, and air connectivity to reduce lead times and ensure timely deliveries to global clients.

India’s FTA Experience

Over the past three decades, India has signed several Free Trade Agreements with both regional and bilateral partners. However, the results have been mixed, with some gains in exports but also rising trade deficits and limited gains in services.

What Happened	What It Means	Example
India started signing FTAs in the 1990s	As India opened up its economy, it also began signing free trade agreements to boost trade and investment.	The first FTA was signed with Sri Lanka in 1998.
Export growth to FTA partners	India’s exports grew by 13.4% for manufactured goods and 10.9% overall from 1993 to 2018.	Exports to ASEAN, Korea, Japan increased — but so did imports.
Growth not solely due to FTAs	The rise in exports also happened with countries without FTAs, so FTAs can’t take all the credit.	Export trends were similar for both FTA and non-FTA partners.
SAFTA performed well	India’s trade surplus with SAFTA countries (South Asia) grew massively, meaning India sold more than it bought.	Surplus rose from $4B in 2005-06 to $21B in 2018-19; biggest gains with Nepal and Bangladesh.
Rising trade deficit with some FTA partners	India started importing more than exporting from countries like ASEAN, Japan, and South Korea.	Deficit with ASEAN rose from $8B in 2009-10 to $22B in 2018-19.
FTAs underused by Indian exporters	Many Indian businesses don’t use the FTA benefits due to lack of awareness or complex paperwork.	Only 5–25% of eligible trade goes through the FTA route (very low).
Weak export growth in value-added sectors	Sectors where India could earn more (like leather, textiles, chemicals) didn’t benefit much from FTAs.	In 13 out of 21 sectors under the India-ASEAN FTA, trade balance worsened.
FTAs cover only a small chunk of trade	India’s FTAs account for just about 15% of its total global trade — not enough to shift the big picture.	So even good or bad FTA outcomes don’t drastically change India’s overall trade.

Problems in India’s FTAs

While FTAs are designed to boost trade, India’s actual experience highlights several structural and negotiating weaknesses that reduce their effectiveness.

What’s Going Wrong	What It Means	Example
Unfair tariff deals	India ended up cutting import duties way more than it was required to, while others didn’t match up.	India agreed to cut 74–86% of tariffs in FTAs, while under WTO it only needed to cut 2%.
Non-tariff barriers	Even though tariffs are removed, Indian goods still face hidden restrictions like tough quality checks or complex import rules abroad.	Japan and other partners use strict standards or permits that block Indian goods.
Difficult to use FTAs	Exporters find the paperwork, rules, and benefits too complicated or not worth the trouble.	Complex “rules of origin” and low cost savings make many exporters avoid using FTAs.
No services coverage	India is strong in services (like IT, finance), but many FTAs don’t allow Indian professionals to easily work abroad.	No MRAs – an Indian doctor or engineer may not be recognized in partner countries.
India’s own internal issues	High transport costs, power shortages, and weak infrastructure make Indian products expensive and less competitive.	Exporters can’t meet delivery timelines or pricing benchmarks.
FTA misuse by others	Some countries route goods through FTA partners to bypass duties unfairly.	Copper imports falsely routed through Sri Lanka to claim benefits.
India seen as ‘protectionist’	Policies like Atmanirbhar Bharat and import restrictions make India appear closed off to free trade.	Other countries hesitate to sign or renegotiate FTAs with India.
Spaghetti Bowl Effect	Too many overlapping FTAs cause confusion, conflicting rules, and slow down trade.	India has separate FTAs with Malaysia and Singapore while also part of India-ASEAN CECA — this creates a tangled mess.
Slow pace of FTA talks	India takes too long to close trade deals compared to others.	Vietnam signed an FTA with the EU, but India-EU FTA talks have been dragging since 2007.