India-UK Free Trade Deal Signed: Key Sectors That Will Benefit and Why It Matters
The Free Trade Agreement (FTA) between India and the United Kingdom has been signed, heralding a new era of commercial engagement. This deal promises significant growth for India’s processed foods, leather, engineering goods, electronics, and pharmaceutical exports among other sectors. The agreement allows nearly all goods and services traded to enjoy zero-duty access, marking a major boost to India’s economy, particularly in agriculture, manufacturing, food processing, and MSMEs.
Prime Minister Narendra Modi termed the signing of this FTA as a historic milestone in the relationship between the two nations. During discussions with UK Prime Minister Keir Starmer, he highlighted how the deal enhances market access and economic opportunities for both countries. Sectors including textiles, footwear, gems and jewellery, seafood, agriculture, and MSMEs stand poised to reap major benefits. Additionally, the agreement will make UK products like medical devices and aerospace components more accessible to Indian consumers at lower prices.
Keir Starmer described the India-UK FTA as the largest and most important trade deal since Brexit, acknowledging its significance for India and the mutual benefits it brings. The deal is anticipated to increase wages, create jobs, and improve living standards in the UK while allowing for reduced tariffs and simplified trade, thereby lowering prices for Indian goods such as clothing, footwear, and food. The UK economy is slated to benefit with an increase of £4.8 billion annually, symbolizing a new era of strengthened global partnerships.
What is a Free Trade Agreement?
A Free Trade Agreement (FTA) is a pact between two or more countries that aims to lower or eliminate duties (tariffs) on goods and services traded across their borders. This reduction in costs makes products more affordable and easier to sell internationally. By facilitating exports, FTAs bolster economies, create jobs, and provide consumers with a wider range of more affordable products. They also attract foreign investment, support development, and strengthen international relationships. Below are some of the sectors where the India-UK Free Trade Agreement is expected to provide notable benefits:
Agriculture and Fisheries
The agreement can significantly benefit Indian farmers. With duty-free access to the UK’s premium food market, Indian staples such as turmeric, cardamom, pepper, pulses, and processed foods like mango pulp and pickles may see export increases of over 20% within three years. More than 95% of agricultural and processed food tariff lines will incur zero duties, thus lowering the landed cost of Indian products and enhancing competitiveness in UK retail chains.
The fisheries sector is also set to benefit immensely. States like Andhra Pradesh, Kerala, Tamil Nadu, and Odisha can expand their seafood exports, such as shrimp and tuna, duty-free to the UK, taking advantage of the market worth USD 5.4 billion.
Processed Foods and Plantation Products
India’s food processing industry, a vital part of the economy, is poised for growth with the FTA. Though only £1.5 million in processed foods are currently exported to the UK, the agreement presents an opportunity to significantly increase this figure. It also aids India’s plantation sector, making exports such as coffee, tea, and spices more competitive within the UK market. Indian instant coffee, in particular, stands to gain traction in the UK’s high-end market.
Leather and Footwear
India’s leather and footwear exports could exceed £1.5 million due to the FTA, creating enormous opportunities for small businesses and artisans. By gaining duty-free access to the UK’s USD 23 billion market, Indian MSMEs will hold a competitive advantage over neighboring countries in sectors like textiles, footwear, gems and jewellery, and furniture. This shift could enhance production, create jobs in regions such as Tirupur and Kanpur, and improve incomes significantly.
Engineering, Electronics, and Pharmaceuticals
The trade deal is set to positively impact India’s engineering goods, electronics, and pharmaceuticals sectors. Exports of engineering goods and electronics such as smartphones and fiber cables are likely to continue their upward trajectory. Indian software companies are also poised for rapid expansion, and the pharmaceuticals sector holds promising opportunities as the UK increases its import of Indian medicines.
MSME and Women Entrepreneurs
The agreement aims to bolster India’s MSME ecosystem, integral to its export economy. MSMEs, including those led by women, will gain from simplified compliance procedures, improved trade finance access, and enhanced global market exposure. Women’s enterprises, particularly in textiles and footwear, stand to flourish, offering products such as Kolhapuri chappals duty-free to the UK market, boosting income and cultural brand recognition.
Boost for Make in India
The India-UK FTA covers more than 90% of products, eliminating trade barriers on nearly all goods and signaling a shift in India’s trade strategy. This approach encourages the export of high-quality, diverse, and value-added products, supporting the ‘Make in India’ initiative by fostering growth and increasing global market presence. As a result, Indian consumers gain access to better quality products at affordable prices, strengthening economic ties and mutual prosperity for both countries.
Furthermore, India’s skilled workforce in sectors like IT, services, and education is expected to benefit from improved access to the UK’s high-value markets. Key aspects include the three-year exemption from social security contributions in the UK, part of the Double Contribution Convention, providing a substantial win for Indian professionals and employers. The agreement also simplifies mobility for professionals such as chefs, yoga instructors, and musicians, reinforcing India’s ambition to become a global hub for talent and cultural exchange.
