In a major diplomatic and economic milestone, India and the United Kingdom signed a landmark Free Trade Agreement (FTA) on July 24, 2025. This long-anticipated deal, finalized during Prime Minister Narendra Modi’s official visit to London, marks a new chapter in bilateral relations and is set to transform key sectors of the Indian economy.
The FTA, which took over five years of negotiations, is being celebrated as a comprehensive and forward-looking partnership. Prime Minister Modi emphasized that the Indian textile, gems, and jewellery sectors, along with several other industries, will be among the biggest beneficiaries. UK Prime Minister Keir Starmer echoed similar sentiments, calling the deal a win-win that boosts trade, creates jobs, and strengthens geopolitical ties.
What Is the India-UK Free Trade Agreement?
A Free Trade Agreement (FTA) allows two countries to reduce or eliminate tariffs, duties, quotas, and trade barriers on goods and services exchanged between them. The India-UK FTA opens up 99% of Indian exports to the UK market at zero duty, including textiles, garments, leather goods, engineering products, agricultural produce, and gems & jewellery.
For the UK, this is its largest post-Brexit trade deal, aiming to deepen ties with the Indo-Pacific region. For India, this is one of its most comprehensive FTAs with a developed Western nation, offering significant access to a high-income consumer market.
How Indian Textile Industry Will Benefit
India is among the world’s largest textile producers, and this sector plays a vital role in employment, especially in states like Tamil Nadu, Gujarat, Punjab, and West Bengal.
Before the agreement, Indian textile exports faced an 8–12% duty in the UK. The new FTA removes these import duties entirely, giving Indian manufacturers a level playing field with countries like Bangladesh and Vietnam that already enjoyed duty-free access under separate agreements.
As a result:
- Indian exporters can price their products more competitively.
- UK-based buyers may increase sourcing from Indian mills and artisans.
- Small and medium enterprises (SMEs) in cities like Tiruppur, Surat, and Ludhiana are expected to see a sharp boost in orders.
- The agreement supports India’s Make in India initiative by encouraging more production and export of high-quality finished goods.
Gems and Jewellery: A Sparkling Opportunity
India’s gems and jewellery sector, which accounts for nearly 7% of India’s GDP and 14% of total merchandise exports, is another big winner. Previously, Indian jewellery entering the UK market was subject to import duties ranging from 2.5% to 4%. The FTA scraps these duties entirely.
This zero-duty access gives Indian jewellers a significant edge over global competitors and is expected to:
- Improve margins for exporters.
- Expand market share in the UK’s premium retail segments.
- Boost demand for handcrafted, traditional Indian jewellery styles.
- Support employment in jewellery hubs like Mumbai, Jaipur, and Surat.
Jewellers across India have already hailed the deal as a “game-changer,” particularly in light of rising global demand for ethically sourced and culturally rich designs.
Other Sectors That Will Gain
Besides textiles and jewellery, the FTA opens up new growth avenues for:
- Leather and footwear: zero-duty exports to UK markets.
- Engineering goods & auto components: highly beneficial for MSMEs.
- Pharmaceuticals: easier access to UK regulatory processes and patents.
- Agriculture & marine products: up to 95% of tariff lines are now duty-free.
Cheaper Imports for Indian Consumers
The agreement is not just about exports. Indian consumers are also expected to benefit from cheaper UK imports like:
- Medical devices
- High-end electronics
- Aircraft parts and machinery
- Educational tools and resources
With reduced tariffs, the prices of many imported goods from the UK will come down, making advanced products more affordable for Indian industries and households.
Impact on Services & Skilled Professionals
Another major element of the deal is the easier mobility of skilled professionals between the two countries. India has secured better access for its IT experts, chefs, musicians, healthcare workers, and teachers.
Some key takeaways:
- Easier recognition of Indian qualifications in the UK.
- Visa relaxation for short-term work assignments.
- Social security waivers for Indian professionals posted in the UK.
- Easier movement under the “India-UK Mobility Partnership.”
Vision 2035: Strategic Cooperation Beyond Trade
The FTA is part of a broader strategic framework called Vision 2035, jointly launched by PM Modi and PM Starmer. This vision outlines collaboration across:
- Defence and security
- Clean energy and climate goals
- Artificial Intelligence and digital transformation
- Education and student exchanges
- Cultural collaboration and tourism
Both nations aim to deepen people-to-people ties and create a long-term alliance built on shared democratic values and economic interdependence.
Projected Economic Impact
- Trade between India and the UK is expected to increase by £25.5 billion annually by 2040.
- The UK’s GDP could grow by £4.8 billion, while India stands to gain jobs, investments, and higher export revenue.
- Indian exporters will save millions in tariffs, improving cash flow and reinvestment capacity.
- The overall trade volume is likely to surpass $120 billion by 2030.
Final Thoughts
The India-UK Free Trade Agreement is more than just a trade pact—it’s a bold step toward redefining economic diplomacy in the 21st century. For Indian businesses, especially in the textile, gems, jewellery, and MSME sectors, this deal opens up unprecedented opportunities in a high-income, high-demand market.
As the global economy becomes more fragmented and protectionist, bilateral FTAs like this one will play a vital role in sustaining growth, fostering innovation, and enhancing mutual prosperity.
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