GS 3 – International Relations
Basic Understanding – India–UK Free Trade Agreement (FTA)
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In July 2025, India and the UK signed a landmark Comprehensive Economic and Trade Agreement (CETA)—India’s first major FTA with a developed economy.
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The agreement grants duty‑free access to about 99% of Indian exports to the UK, covering textiles, gems & jewellery, engineering goods, chemicals, marine products, pharmaceuticals, automobiles, agro‑products, services, and more.
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Conversely, the UK secures reduced tariffs on about 90% of its exports into India, including whisky, cars, cosmetics, medical devices, EVs, and food.
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India has also negotiated safeguards for sensitive domestic sectors, phasing in liberalisation gradually for only ~25% of UK exports initially.
Economic Implications — Duty-Free Access as an FDI Driver
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Export-led growth: With zero duties on nearly all exports, Indian companies—particularly SMEs in textile clusters (e.g. Tiruppur, Surat), gems and jewellery (Gujarat, Tamil Nadu), chemicals, and engineering goods—can scale up and attract capital. Estimated export impact: textiles may double, and chemical exports may rise by 30–40%.
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Strengthening “Make in India”: Enhanced access to UK markets boosts confidence among international investors in India’s manufacturing capabilities and supply chains.
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Foreign Direct Investment Inflows: Access to global buyers via UK encourages British and global firms to set up production and sourcing bases in India to benefit from the export windows—contributing to FDI flows.
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Services & personnel mobility: The pact includes visa-relaxation, mutual recognition of professional qualifications, and social security waivers—facilitating movement of Indian professionals, and encouraging UK financial, tech, and consulting firms to invest in Indian service hubs.
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Strategic sectors and clean tech: The FTA opens doors for UK investment in India’s clean energy, digital infrastructure, pharmaceutical manufacturing, EV ecosystems, and green tech collaborations.
Summary Table
| Key Feature | Implications for India |
|---|---|
| 99% duty-free Indian exports | Boost for labour‑intensive & MSME sectors |
| Reduced UK import tariffs | Greater imports but also FDI potential |
| Phased liberalisation safeguards | Domestic industry protection |
| Visa & qualification levers | Spur services & talent-centric FDI |
| FDI boost prospects | Investors seek export‑friendly base |