India-UK FTA: The good, the bad and the ugly

Both India and the UK have predictably hailed the Indo-UK Free Trade Agreement (FTA), signed on Thursday, 24 July, as historic. However, India being a relatively small trading partner of the UK, with just 1.8 per cent of UK exports heading to India until now, and with imports from India constituting 1.9 per cent of the UK's total imports, it will be a while before we get to know how much India stands to gain.

The two prime ministers also agreed on closer collaboration around defence, education, climate, technology and innovation besides enhanced intelligence-sharing and operational collaboration in tackling corruption, serious fraud, organised crime, and irregular migration. This includes finalising a new sharing agreement for criminal records, which will assist court proceedings, help maintain accurate watchlists, and enable the enforcement of travel bans.

It was not immediately clear, however, how the agreement will help India get economic offenders like Nirav Modi and others extradited to face trial in India. Congress MP and general-secretary (communications) Jairam Ramesh earlier on Thursday took a swipe and called for a Fugitive Transfer Agreement (FTA) between the two countries.

Delhi-based think tank Global Trade Research Initiative (GTRI) had flagged concerns that the FTA allows British firms to participate in the Indian government’s procurement of goods and services of non-sensitive Central government entities. This opens up a huge market of an estimated $600 billion to UK firms. India had until now kept government procurement out of trade deals to spur local enterprise. That avenue is now likely to shrink.

Another concern flagged by GTRI was that India is understood to have agreed to patent rules that go beyond the WTO’s Agreement on Trade Related Aspects of Intellectual Property Rights. This is a historic shift in the Indian government’s policy and signifies submission to the big pharmaceutical lobby. This will impact access to affordable medicines within India and endanger our position as a global leader in manufacturing generic drugs.

The India-UK FTA (Free Trade Agreement) will be signed today in London in the presence of Prime Minister Modi. What India needs from the UK is the announcement of another and more effective FTA (Fugitive Transfer Agreement). After all, three stars of the Modi Model of…

— Jairam Ramesh (@Jairam_Ramesh) July 24, 2025

What India needs from UK is another Fugitive Transfer Agreement: Congress

Prime Minister Narendra Modi highlighted that Indian textiles, footwear, gems and jewellery, seafood including frozen prawn, and engineering goods will benefit from lower tariffs and get better market access to the UK. Indian manufacturers of electric and hybrid vehicles too will be taxed at lower rates in the UK.

For predictable reasons, the PM underplayed that UK-made automobiles, whiskey and gin will also get better market access in India vis-à-vis competitors. So will British electrical goods, medical devices, cosmetics, lamb, salmon, chocolates and biscuits, besides luxury cars and aerospace equipment.

Average tariffs for UK exports to India will drop from 15 per cent to 3 per cent, making it easier for British companies to sell in India. UK-made whisky tariffs destined for India will be slashed in half, from 150 per cent to 75 per cent, gradually dropping to 40 per cent by 2035. The prices will, however, fall only after the deal gets through the British Parliament, a process which, it is estimated, will take the better part of a year.

The two countries continue with negotiations to finalise a bilateral investment treaty. India has for the time being managed to stall the UK’s financial and legal services industries from getting a foothold in India. The two countries also continue to discuss the UK's plans for a tax on high-carbon industries, which India believes could hit its imports unfairly.

The Indian government welcomed an extended exemption on national insurance contributions. The agreement means staff from Indian companies who are temporarily transferred to the UK, and staff from UK firms who are temporarily working in India, will only pay social security contributions in their home country, rather than in both places. The UK already has similar reciprocal "double contribution convention" agreements with 17 other countries including EU member states, the US, and South Korea, and it will be a major relief to India’s corporate sector.