The India-UK Free Trade Agreement: A gamechanger for bilateral prosperity
Here's why the India-UK FTA is a gamechanger for both nations.The Global Backdrop: Why the FTA Matters NowThe global economy in 2025 is navigating turbulent waters. Trade wars, particularly the looming challenge of US tariffs under a protectionist administration, have disrupted global supply chains. The UK, post-Brexit, faces the challenge of replacing lost EU market access, while India, having opted out of the Regional Comprehensive Economic Partnership (RCEP) in 2019, seeks to diversify its trade partnerships beyond traditional markets.Geopolitical tensions, including strained US-China relations and regional conflicts, underscore the need for resilient trade networks. Against this backdrop, the India-UK FTA is a strategic move to insulate both economies from global volatility, deepen bilateral ties, and position them as key players in a multipolar world.For the UK, the FTA is its most significant post-Brexit trade deal, unlocking access to India's rapidly growing market of 1.4 billion consumers and a projected $5 trillion economy by 2028. For India, it's a step toward its 'Viksit Bharat' vision of becoming a developed nation by 2047, diversifying trade partners and reducing reliance on any single market.The agreement aligns with the 2030 roadmap for India-UK strategic cooperation, fostering collaboration in trade, technology, energy, and security. In a world where economic security is paramount, this FTA is a bold statement of intent to build a robust, future-ready partnership.Overall Gains: A Win-Win for India and the UKThe India-UK FTA is poised to deliver substantial economic benefits, doubling bilateral trade from $60 billion (42.6 billion) in 2024 to $120 billion by 2030, with an annual trade boost of 25.5 billion ($34 billion) by 2040. This ambitious target is underpinned by sweeping tariff reductions, enhanced market access, and innovative provisions that cater to modern trade needs.For both nations, the FTA eliminates or reduces tariffs on a vast majority of goods, making exports more competitive. The UK will remove tariffs on 99% of Indian tariff lines, covering nearly 100% of India's trade value, while India will reduce tariffs on 90% of UK tariff lines, with 85% becoming fully tariff-free within a decade.advertisementThis translates to lower prices for consumers - UK shoppers will enjoy cheaper Indian apparel, footwear, and marine products like frozen prawns, while Indian consumers will access affordable UK goods like whisky, cosmetics, medical devices, and salmon. The agreement also fosters job creation in labour-intensive and high-tech sectors. In India, industries like textiles, leather, and engineering goods will see significant employment growth, while the UK will benefit in manufacturing, clean energy, and services.The FTA's pioneering chapters on anti-corruption, labour rights, gender equality, and environmental standards mark a progressive approach, aligning trade with global ethical norms—a first for India in any FTA. Professional mobility is another cornerstone of the deal. The agreement facilitates easier movement for professionals, such as Indian IT workers, yoga instructors, and chefs, and UK financial service providers and engineers.A Double Contributions Convention (DCC) exempts workers temporarily posted in either country from dual social security contributions for up to three years, saving employers and employees significant costs—approximately Rs 40 billion ($463 million) annually for India alone.This provision not only boosts remittances but also strengthens people-to-people ties. Innovation and investment are further catalysts. The FTA promotes digital trade by recognising electronic contracts and protecting businesses from forced source code transfers, fostering collaboration in IT, financial services, and clean energy.advertisementThe UK, already India's sixth-largest foreign investor with $36 billion committed, is expected to ramp up investments in infrastructure, electric mobility, and renewables. A parallel Bilateral Investment Treaty (BIT) under negotiation will further enhance investor confidence by addressing dispute resolution and taxation.Strategically, the FTA shields both nations from global trade disruptions. For the UK, it compensates for lost EU market access, while for India, it reduces dependence on specific trade blocs, offering a buffer against US tariffs and Chinese economic influence. This deal is a testament to the power of bilateral cooperation in an era of global uncertainty.India's Gains: A Catalyst for Economic AmbitionFor India, the FTA is a catalyst for economic growth, job creation, and global integration. The elimination of UK tariffs on 99% of Indian exports—previously facing duties of 4% to 16%—unlocks immense potential for key sectors. Textiles and apparel, a cornerstone of India's labour-intensive economy, are set to see exports grow by $5 billion, benefiting companies like Welspun India, Arvind Ltd., and Vardhman.advertisementFootwear giants like Bata India and Relaxo will gain from duty-free access, as will marine products (for example: frozen prawns), leather goods, gems and jewellery, engineering goods, and auto components.Agricultural exports like grapes and mangoes will also become more competitive, boosting rural incomes. The automotive sector, particularly electric vehicles (EVs), is a standout beneficiary. Indian manufacturers like Tata Motors and Mahindra Electric will gain preferential access to the UK market under a quota system, with tariffs on auto components slashed.This aligns with India's push for green mobility and strengthens its position in the global EV market. The services sector, a powerhouse of India's economy, stands to gain significantly. The FTA's provisions for professional mobility open doors for Indian IT professionals, healthcare workers, and creative professionals like yoga instructors and musicians.The DCC's social security exemption will save Indian employers and workers substantial costs, boosting remittances, which reached $130 billion in 2024, with the UK as a key source. These gains strengthen India's service exports, a critical driver of its GDP.India has also safeguarded its sensitive sectors, exempting agricultural products like dairy, apples, and poultry, as well as industrial goods like diamonds and cell phones from tariff cuts. This pragmatic approach protects rural livelihoods and domestic industries while maximising export opportunities.advertisementThe FTA's focus on investment will attract UK capital to India's infrastructure, manufacturing, and renewable energy sectors, supporting the country's $5 trillion economy goal by 2028. Strategically, the FTA diversifies India's trade portfolio, reducing reliance on any single market and enhancing economic resilience.It also positions India as a formidable player in global trade, setting a precedent for future FTAs with the EU and the US. By aligning with a major Western economy, India strengthens its geopolitical leverage in a multipolar world.Pragmatic Leadership: Modi's Vision Meets UK ResolveThe finalisation of the India-UK FTA after 14 rounds of negotiations since January 2022 is a testament to the pragmatic leadership of Prime Minister Narendra Modi and his UK counterpart. Modi's government has prioritized economic diplomacy to drive India's global integration, balancing domestic interests with international ambitions.By safeguarding sensitive sectors like agriculture and securing concessions on professional mobility—a long-standing Indian demand—Modi's team has crafted a deal that aligns with the 'Make in India' and 'Viksit Bharat' visions. The UK, under its new Labour government, has shown equal resolve in prioritising this deal to bolster its post-Brexit trade credentials.The mutual commitment to overcoming sticking points, such as the UK's Carbon Border Adjustment Mechanism (CBAM) and India's concerns over legal services, reflects a shared understanding of the deal's strategic importance.The ongoing negotiation of a BIT further underscores both leaders' forward-thinking approach to deepening economic ties. Modi's pragmatic diplomacy has also ensured that the FTA serves as a blueprint for future agreements. By securing favorable terms with the UK, India has demonstrated its ability to negotiate complex trade deals that balance export growth with domestic protection.Ripple Effects: Paving the Way for an India-US Trade DealThe India-UK FTA's success has far-reaching implications for India's trade ambitions, particularly with the United States. As the world's largest economy, the US is a critical partner for India, with bilateral trade reaching $120 billion in 2024.However, negotiations for a comprehensive India-US trade deal have been slowed by issues like market access, intellectual property rights, and US tariff policies. The India-UK FTA serves as a model for navigating these challenges.By securing concessions on services, professional mobility, and investment while protecting sensitive sectors, India has demonstrated its negotiating prowess. The FTA's progressive chapters on labour, gender, and environmental standards align with US priorities, potentially easing concerns in Washington about India's trade practices.The DCC's social security exemption could also serve as a template for addressing similar issues in US negotiations, where Indian IT professionals and temporary workers face significant visa and tax barriers.Moreover, the FTA strengthens India's position as a reliable trade partner, countering US concerns about supply-chain dependencies on China. By showcasing its ability to deliver a high-impact trade deal with the UK, India bolsters its case for deeper economic engagement with the US.While challenges like the US's protectionist stance and India's reluctance to liberalise certain sectors remain, the India-UK FTA provides momentum and a framework for progress.A Partnership for the FutureThe India-UK Free Trade Agreement is a gamechanger that transcends traditional trade pacts. It is a strategic alliance that harnesses the economic strengths of two dynamic nations, fostering growth, innovation, and resilience in an uncertain world.For India, the FTA unlocks vast export opportunities, creates jobs, and attracts investment, propelling it toward its $5 trillion economy goal. For the UK, it compensates for Brexit-related challenges, opening a high-growth market and reinforcing its global trade stature.Under the pragmatic leadership of Narendra Modi and the UK's resolve, this deal reflects a shared vision for prosperity and partnership. Its success not only strengthens India-UK ties but also paves the way for India's ambitions on the global stage, particularly in negotiations with the US. As both nations navigate the complexities of global trade, the India-UK FTA stands as a testament to the power of collaboration, setting the stage for a brighter, more connected economic future.(Tuhin A Sinha is a national spokesperson of the BJP, and an author)- Ends(Views expressed in this opinion piece are those of the author)Tune InMust Watch
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