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India - UK Free Trade Agreement (FTA) : A landmark in bilateral tade relations

Author: Gaurav Shankar |

Article by Business Law Chamber

In a major development poised to reshape the economic relationship between two global powerhouses, on May 6, 2025, India and the United Kingdom have concluded negotiations on a comprehensive Free Trade Agreement (FTA), marking the culmination of over three years of negotiations. This FTA offers immense opportunities for businesses on both sides.

Key Highlights of the FTA

→ For India

  • Tariff Elimination on Exports: 99% of Indian goods exported to the UK will enjoy zero tariffs, benefiting key sectors like textiles, leather, gems & jewellery, pharmaceuticals, and engineering goods.
  • Automobile Sector Boost: Tariffs on Indian automotive exports, previously up to 100%, will reduce to 10%, significantly improving market competitiveness.
  • Labour Mobility Provisions: Indian professionals, including contractual service providers, business visitors, and independent professionals (e.g., chefs, yoga instructors, musicians), will benefit from streamlined visa norms. Additionally, a bilateral social security agreement ensures that employees seconded to the UK are exempt from double social security contributions for up to three years.
  • Regulatory Cooperation: Mechanisms to reduce non-tariff barriers and promote mutual recognition of standards in sectors like pharmaceuticals and electronics.

→ For the United Kingdom

  • Tariff Reductions on Exports to India: About 90% of UK goods will see phased tariff reductions, with most becoming duty-free within ten years.
  • Scotch Whisky & Automotive Exports: Tariffs on Scotch whisky will decrease from 150% to 75% immediately, and further to 40% over the next ten years. UK-manufactured cars, including electric vehicles, will benefit from improved tariff terms and preferential quotas.
  • Access to India's Services Market: Enhanced access for UK legal, financial, and educational services. Legal firms will now be able to establish representative offices and collaborate with Indian counterparts more efficiently.
  • Stronger IP Protections: Commitments to modernize and align intellectual property (IP) frameworks to support innovation and creative industries.

Compliance Implications

The FTA opens several new avenues but, also introduces regulatory obligations that businesses must proactively plan for:

  • Rules of Origin (ROO): India has insisted on strict ROO to avoid third-country trade circumvention. Companies must maintain robust documentation to prove origin eligibility.
  • Dispute Resolution Framework: Investment protections and an evolving arbitration framework are part of the agreement, though detailed procedures will be finalized in subsequent instruments.
  • Digital Trade & Data Protection: While the UK has pushed for liberal digital trade rules, India has maintained a cautious stance, owing to its ongoing policy evolution on data localization and privacy. Businesses involved in cross-border data transfers must watch for updates in India’s Digital Personal Data Protection Act, 2023 and related subordinate legislation.
  • Sustainability & Green Trade: The agreement reflects emerging global standards on environmental governance, though claims of a UK carbon tax exemption for Indian exporters remain unverified in official documentation.

The UK government estimates a £4.8 billion annual boost to its economy, while bilateral trade is expected to increase by £25.5 billion by 2040. India’s long-term gains include job creation, export expansion, and diversified market access for its SMEs and large exporters alike. With formal implementation expected in 2026, businesses have a critical window to realign supply chains, update contracts, and assess tax and compliance positions under the FTA’s framework.

Disclaimer: The views in this article are author's point of view. This article is not intended to substitute legal advice. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information. For any further queries or follow up, please contact us at communication@businesslawchamber.com.