After three and a half years of negotiations, India and the UK concluded a historic free trade agreement (FTA) on May 6. Under this deal, India will reduce tariffs on 90 per cent of tariff lines, with 64 per cent eligible for immediate tariff-free imports from the UK. On the other hand, India’s exports will benet from the elimination of 99 per cent of the UK’s import duties. The UK-India FTA has come at a strategically benecial time for both countries. At a time when the world is succumbing to protectionism and tariff wars, this comes with a unique opportunity to reform and reset its trade ecosystem, positioning India as a India is the UK’s 12th largest trading partner, while the UK ranks as India’s 16th largest trading partner, with total trade amounting to $56.7 billion in 2024, 60 per cent of which is in services. Alongside the FTA, India and the UK have agreed to negotiate a Double Contribution Convention Pact, which would exempt Indian professionals on short-term assignments in the UK from contributing to social security schemes in the host country.
They and their employers can continue with social security schemes run by the Employees’ Provident Fund Organisation (EPFO) in India while working abroad. This will boost job opportunities for Indian professionals in the UK by reducing the additional cost of £500 per employee per year for employers. India is expected to benet from the elimination of tariffs on 99% of goods. Indian exports in sectors such as textiles, leather, footwear, auto parts, and gems and jewellery are expected to benet from duty-free access to the UK’s markets. Previously, textiles and apparel exports faced a 12% duty in the UK, whereas India’s competitors, Bangladesh and Vietnam, enjoyed duty-free access. While this FTA will create a more level playing eld for Indian exports, India must enhance its competitiveness in this sector to compete with Bangladesh (which holds a 15 per cent share in the UK’s textiles and clothing imports) and Vietnam.
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