The government announced on 6 May 2025 that the UK had concluded a free trade agreement (FTA) with India describing it as a “huge economic win for the UK” and a “landmark trade deal”. It emphasised the potential of the Indian market with its economy expected to be the third largest in the world by 2028.

Full details of the agreement are not yet available. Some issues are still to be resolved including the details of auto quotas and carbon border taxes. Politico reports that the latter is being dealt with outside the trade deal in separate, ongoing negotiations. In addition, negotiations on a Bilateral Investment Treaty (BIT) are ongoing.

This is the UK’s fourth new trade agreement since Brexit, after those with Australia and New Zealand and the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

A blog by the Centre for Inclusive Trade Policy commented:

In all, an FTA between two major economies is a ray of hope for the world. In a world in which trade rules and agreements tumble almost every day, creating certainty about market access conditions, and generally about the prevailing rules of the game, may be one of the biggest achievements of this agreement.

Progress of the negotiations

Negotiations for a UK-India FTA were launched in January 2022 under the Conservative government. In April 2022, the then Prime Minister, Boris Johnson, said that negotiators had been told to “to get it done by Diwali in October.” However, in October 2022, the then Secretary of State for International Trade, Kemi Badenoch, said that the government was no longer working to this deadline. She added that the government wanted “to focus on the quality of the deal rather than the speed of the deal”. The deal was “95% done” under the Conservative government according to Indian officials.

Statistics on UK trade with India

The UK exported £17.1 billion of goods and services to India in 2024. Goods exports were worth £7.0 billion and exports of services £10.1 billion. The UK imported £25.5 billion from India (£10.8 billion of goods and £14.7 billion of services). The UK had a trade deficit with India of £8.4 billion in 2024. The deficit on trade in goods was £3.8 billion and there was a deficit on services of £4.6 billion.

India accounted for 2.0% of all UK exports in 2024 and was the UK’s 12th largest export market. India was the 11th largest source of UK imports, accounting for 2.8% of the total. India is particularly important as a source of UK imports of services. In 2024, it was the fourth largest source of service imports for the UK, making up 4.7% of all service imports.

More statistics on UK trade with India can be found in DBT’s Factsheet (PDF).

Businesses have faced considerable barriers to India’s market

The Indian market is highly protected. Its trade-weighted average tariff was 12% in 2023 (PDF). Some individual products have much higher tariffs, however. For example, the maximum tariff on beverages and tobacco is 150%, on textiles 379% and on clothing 239%.

Barriers to trade in services are also relatively high in India. The OECD Services Trade Restrictiveness Index measures barriers to trade in services. Out of 51 countries analysed, India ranked 43rd (where first means a country has the lowest trade barriers).

Economic impact

The Department for Business and Trade (DBT) has published preliminary estimates of the economic effects of the agreement. It will publish a full impact assessment in due course.

DBT estimates GDP will be £4.8 billion (or 0.1%) higher per year in the long run (by 2040) than it would have been without the FTA. UK exports to India are estimated to be £15.7 billion higher by 2040 (an increase of 59%) and UK imports from India £9.8 billion higher (25%) than they would have been without the agreement. Real wages are estimated to be 0.2% higher.

What is in the agreement?

The government has published a summary explaining the 27 chapters of the agreement. These chapters include market access for goods, trade in services, digital trade, environment, labour, sanitary and phytosanitary issues (relating to human, animal and plant life and health), and small businesses.

Goods

The agreement contains cuts to tariffs which will make it easier for UK businesses to export to India and make imports from India cheaper for UK consumers. While full details of the tariff reductions have yet to be published, some information is available.

As soon as the FTA comes into force, 64% of tariff lines (detailed product descriptions) will be eligible for tariff-free export to India, covering £1.9 billion of current UK exports. Tariff reductions will be phased in over 10 years, so that 85% of tariff lines and 66% of existing Indian imports from the UK will be eligible for tariff-free entry.

Tariffs on UK exports will be cut by over £400 million when the FTA comes into force rising to £900 million after 10 years.

UK whisky exports will see tariffs cut from 150% to 75% immediately and to 40% in the tenth year of the agreement. The Scotch Whisky Association described the deal as “transformational” and said it could increase exports by £1 billion over the next 5 years and create 1,200 jobs in the UK.

“High-end” cars will see tariffs cut from over 100% to 10% under a quota but it is unclear how large this quota will be. Tariffs on lamb will be cut from 33% to zero when the agreement comes into force.

Reductions in UK tariffs on imports from India are also likely to mean lower prices for UK consumers for clothing, footwear, and food. Tariffs on 99% of Indian goods will be eliminated.

Some sectors such as sugar, milled rice, pork, chicken, and eggs are excluded from the UK’s tariff cuts. This approach ensures that the UK market remains protected from lower-priced imports in these sensitive categories.

Services

According to the government’s summary:

UK businesses in the covered sectors will not face restrictions such as limits on the number of businesses able to supply a service. UK businesses will not need to set up a company in India or be a resident in India to supply their services in covered sectors.

This chapter will ensure that UK businesses in covered sectors will benefit from the same treatment granted to Indian businesses by the Indian government. This means businesses in a number of services sectors have greater certainty that they won’t be disadvantaged compared to domestic Indian competitors.

The Economist commented, however, that there was a “lack of progress” on trade in services and the Law Society described the failure to include legal services in the agreement as a “missed opportunity”.

Procurement

On procurement, the government said that “UK businesses will have guaranteed and unprecedented access to India’s vast procurement market”. India’s federal government bodies covered by the agreement publish around 40,000 tenders, worth at least £38 billion in total, a year. The government’s summary said that “UK businesses will have legally guaranteed access to compete for a proportion of these contracts that meet the criteria specified within India’s schedule.”

National insurance contributions

The exemption of Indian workers on short-term transfers to the UK from national insurance contributions has been the most controversial element of the agreement. These provisions are in a reciprocal Double Contributions Convention, negotiated alongside the FTA.

Employees of Indian companies working temporarily in the UK for up to three years will pay social security contributions in India. Similar provisions will be available to UK businesses seconding employees to India. While this will not increase the number of visas, there will be an increased incentive for companies to second Indian workers to the UK, according to The Times. The government does not appear to have done an impact assessment of this change.

A blog by the Centre for Inclusive Trade Policy suggested that these provisions may have been agreed instead of more business visas, which India usually seeks in FTA negotiations.

According to the Times, these provisions will cost the Treasury £200m a year in tax revenue, based on an impact assessment carried out under the Conservative government. This assumed 20,000 Indian workers come to the UK each year under intra-company transfer arrangements. This is the current figure and therefore does not take into account any increase in numbers as a result of the deal. The Conservatives have called for an impact assessment of the cost and implications for the number of Indian workers coming to the UK.

The government has said that the UK has similar arrangements with the EU and a number of other countries and that Indian companies will still pay social security contributions on salaries in India. Indian contractors will not get a UK state pension and will have to pay a surcharge to use the NHS. The government also said the points-based immigration system would not be affected.

The Financial Times also reported that Indian officials had claimed that Kemi Badenoch, as Business and Trade Secretary, had agreed to the same tax arrangements but only for two years. This was disputed by Badenoch’s spokesperson.

What happens next?

The UK and India will finalise the legal text of the agreement which will then be signed.

Parliamentary scrutiny of the agreement will be in line with the Constitutional Reform and Governance (CRAG) Act 2010. This does not guarantee Parliament a vote on the agreement (see Commons Library research briefing Treaty-making and parliamentary scrutiny: recent developments).

Any changes to legislation required to implement the agreement will be scrutinised and passed by Parliament in the usual way.

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