In a landmark achievement, India and the United Kingdom have finalized a free trade agreement (FTA) that promises to reshape economic ties between the world’s fifth and sixth-largest economies. Announced on May 6, 2025, the deal marks the UK’s most significant trade pact since Brexit and India’s most ambitious FTA to date, with projections to boost bilateral trade by £25.5 billion ($34 billion) by 2040.
A Milestone in Bilateral Relations
Indian Prime Minister Narendra Modi hailed the agreement as a “historic milestone” on X, emphasizing its role in fostering job creation and investment. UK Prime Minister Keir Starmer echoed this sentiment, calling it “fantastic news for British business, workers, and shoppers.” The agreement, which includes a Double Contribution Convention for social security, was finalized after over three years of negotiations, accelerated by global trade pressures from U.S. tariff policies under President Donald Trump.
Key Fact: The deal will slash tariffs on 90% of British exports to India, including whisky, gin, cosmetics, and medical devices, with 85% becoming tariff-free within a decade.
Delighted to speak with my friend PM @Keir_Starmer. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention. These landmark agreements will further deepen our…
— Narendra Modi (@narendramodi) May 6, 2025
What’s in the Deal?
The FTA significantly reduces trade barriers, with India cutting tariffs on British products like whisky and gin from 150% to 75%, eventually dropping to 40% by year ten. Automotive tariffs will fall from over 100% to 10% under a quota system. For Indian consumers, the deal lowers tariffs on cosmetics, aerospace, lamb, medical devices, and chocolates, enhancing affordability and access. Meanwhile, 99% of Indian exports, such as clothing and footwear, will face no import duties in the UK, boosting India’s textile and manufacturing sectors.
The agreement also facilitates limited visa routes for Indian professionals in sectors like IT and healthcare, with around 100 new visas annually, though it does not alter UK immigration policy. Additional chapters focus on anti-corruption measures, gender equality, and environmental and labor standards, reflecting a commitment to sustainable trade.
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Overcoming Challenges
Negotiations, which began in January 2022, faced hurdles over issues like visas, carbon taxes, and market access. India’s push for exemptions from the UK’s forthcoming carbon border adjustment mechanism (CBAM) was not included in the final deal, though discussions continue. The breakthrough came after intensive talks in London, with India’s Commerce Minister Piyush Goyal and UK’s Business and Trade Secretary Jonathan Reynolds resolving most outstanding issues last week.
“This is a bold, future-ready step that will unlock growth and jobs,” Goyal tweeted, crediting Modi’s leadership for the achievement.
Economic Impact and Future Prospects
The UK government estimates the deal will add £4.8 billion annually to its economy by 2040, providing relief to industries affected by U.S. tariffs. For India, the FTA opens new markets for its burgeoning manufacturing and service sectors, strengthening its position as a global trade hub. Bilateral trade, valued at $21.34 billion in 2023-24, is expected to grow significantly.
Modi and Starmer are set to meet in the coming months to formally sign the agreement, with Starmer potentially visiting India later this year. The deal not only deepens economic ties but also sets a precedent for future trade partnerships in a shifting global landscape.