India, UK Sign Landmark Free Trade Agreement: 99% Tariff Free Access, Visa Boost, $34 Billion Trade Surge Expected

  • Last Modified : July 29, 2025
Indian and UK leaders sign Free Trade Agreement 2025 with key export and visa benefits

London: India and the United Kingdom signed a landmark Free Trade Agreement on Thursday, ending years of negotiations and setting the stage for a major expansion in bilateral trade. The deal covers more than 1,659 tariff lines and offers 99% tariff-free access for Indian goods entering the UK market. Indian officials have called it one of the most ambitious and commercially meaningful agreements India has ever signed.

The agreement, signed in London during a formal meeting between Prime Minister Narendra Modi and British Prime Minister Keir Starmer, is expected to boost India’s exports in sectors such as textiles, gems and jewellery, pharmaceuticals, leather, and engineering goods. The Commerce Ministry estimates that India could gain over $20 billion in export value in the next five years, while bilateral trade is projected to rise by over $34 billion during the same period.

Key gains for India include the elimination of up to 16% tariffs on garments, 5% on gold jewellery, and up to 16% on leather and footwear. British imports such as Scotch whisky, cars, and certain food products will see phased duty reductions from India, with 150% tariffs on Scotch being reduced to 75% immediately and 40% over 10 years, and car import duties falling from 100% to 10% within the same period.

A separate provision allows for the issuance of 3,000 UK visas per year to Indian professionals under 35, without employer sponsorship, valid for two years. In addition, both countries have agreed to simplify customs procedures, support small businesses and recognize professional qualifications in select sectors.

The agreement is now being seen as a benchmark deal, blending goods, services, mobility and regulatory cooperation under one framework. Once ratified, it is expected to offer long term economic benefits for exporters, professionals and businesses on both sides

Key Highlights: India–UK Free Trade Agreement

  • 99% of Indian exports to the UK will now enter duty-free, covering over 1,659 tariff lines, including textiles, garments, pharma, leather, gems, and engineering goods.
  • Tariffs up to 16% on garments, 5% on gold jewellery, and 16% on leather/footwear will be eliminated.
  • Scotch whisky duties to drop from 150% to 75% immediately and 40% over 10 years; car duties (CIF over $48,000) will reduce from 100% to 10% over 10 years under a quota system.
  • Indian professionals exempt from UK social security contributions for up to three years under the Double Contribution Convention.
  • 3,000 annual UK visas for Indian professionals under 35, with 2-year stay, no employer sponsorship required.
  • UK tariffs on chocolates, biscuits and salmon to be phased down; duties on UK apples will drop from 70% to 35% in seven years.
  • Sectors protected by India: wheat, dairy, rice, poultry and edible oils- duties retained.
  • Indian pharma exporters to benefit from simplified UK approvals for generic medicines.
  • Agreement includes mutual recognition of professional qualifications in fields like architecture, accounting, and engineering.
  • Customs procedures to be digitized and streamlined; bilateral safeguard clause protects against import surges.
  • Projected to add $34 billion in bilateral trade and create over a million jobs in five years.

Table of Contents

Significant wins for professionals and MSMEs

A key feature of the agreement is the Double Contribution Convention, exempting Indian professionals on UK assignments of up to three years from paying UK social security contributions. Up to 1,800 Indian contractual service suppliers, including chefs, yoga instructors, and musicians, can work in the UK annually under eased mobility provisions. These measures ease financial and compliance burdens for Indian workers across skilled service sectors.

The FTA also introduces provisions for recognition of qualifications in areas like architecture, accounting, and engineering, which is expected to support smoother entry for Indian talent in global markets. Officials said this move would especially help professionals from mid-sized Indian firms and consultancy practices.

India’s micro, small and medium enterprises (MSMEs) are also expected to benefit. The deal removes many technical and procedural trade barriers that previously slowed exports. Easier customs processes and mutual recognition of standards are being put in place to reduce red tape and support cross-border trade.

Deal Covers 99% Tariff Lines; Sectoral Gains and Product Breakdowns

The India–UK FTA offers 99% tariff-free access to Indian goods entering the UK market, making it one of the most comprehensive trade deals India has signed with a developed economy. It includes over 1,659 tariff lines and is expected to give a competitive edge to Indian exports in several high-growth sectors.

  1. Textiles and garments: Indian textile products currently face up to 16% duties in the UK. With this deal, those duties will be eliminated, providing an expected boost of over $2 billion in exports over the next five years, according to Indian government estimates.
  2. Gems and jewellery: Tariffs of 5% on gold jewellery and 2% on silver items will now be scrapped. This is significant for India’s jewellery sector, which contributes around 7% of India’s total merchandise exports. Indian exporters will now be able to ship studded jewellery without the previously required international certification.

3. Engineering goods and machinery: Duties of up to 10% on Indian engineering exports will be removed. The government expects this will support growth in electrical machinery, industrial components, and light manufacturing.

  1. Pharmaceuticals: Indian pharma companies will benefit from eased regulations and quicker approvals. Generic medicines that previously required multiple clearances will now move faster through UK channels, opening up one of the world’s largest healthcare markets to Indian firms.
  2. Leather and footwear: These products faced tariffs as high as 16%, all of which will be removed under the FTA. The move is expected to support small manufacturers and help Indian firms compete with rivals from Vietnam and Indonesia.

India will also provide preferential market access to a limited number of UK-origin products:

  • Scotch whisky: Tariffs currently at 150% will be gradually reduced to 75% immediately and 40% over 10 years.
  • Cars (over $48,000 CIF value): Duties to be cut from over 110% to 10% over 10 years.
  • Certain food products like chocolates, biscuits, and salmon will also face reduced tariffs, though no full elimination is expected in these categories.

Agricultural sensitivities were protected. India retained tariff protection for dairy, poultry, rice, wheat, oils and other politically sensitive categories. Apples and pears from the UK, however, will see a reduction in duties from 70% to 35%, phased over 7 years.

Services, Mobility, and Mutual Recognition Agreements

One of the key highlights of the agreement is the mobility provisions, allowing up to 1,800 Indian contractual service suppliers annually, including professionals like chefs, yoga instructors, and musicians, to work temporarily in the UK. Indian professionals on short-term assignments will benefit from the Double Contribution Convention, exempting them from UK social security contributions for up to three years. This provision is aimed at boosting talent exchange and is expected to benefit professionals in IT, finance, engineering, healthcare, and consultancy services.

The deal also includes commitments to mutual recognition of qualifications in areas such as architecture, engineering and accounting. This means Indian professionals in these fields may now find it easier to have their credentials accepted in the UK, enhancing their employability across borders.

In the services sector, Indian businesses will gain enhanced market access in areas like IT/ITeS, banking, professional, and educational services. The agreement also ensures non-discriminatory treatment for Indian service providers, opening up new possibilities for Indian institutions to offer training, consulting, and support services within the UK. UK firms will gain access to India’s federal government procurement tenders worth over £38 billion annually in non-sensitive sectors, benefiting sectors like financial and professional services.

Customs, Dispute Resolution, and Safeguards

Both countries have agreed to simplify customs procedures to cut delays and lower costs. There will be cooperation in digital customs clearance and paperless documentation, which is expected to benefit exporters and importers on both sides.

The agreement includes a bilateral safeguard mechanism, which allows either country to temporarily raise tariffs if imports from the other side surge unexpectedly and hurt local industries. This clause was pushed strongly by Indian negotiators to protect domestic MSMEs from any potential import shock.

In case of trade disputes, both sides have agreed to use a structured dispute resolution mechanism, with clear timelines for consultations, mediation, and legal recourse. Officials said this mechanism is designed to ensure that businesses from both countries have a fair and timely process to resolve issues.

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Projected Impact and Official Statements

According to estimates by UK officials, the deal could add over $34 billion in trade volume over the next five years. It is also expected to create more than a million jobs across industries ranging from garments to engineering services.

Speaking after the signing, Prime Minister Narendra Modi called the FTA “a bold and forward-looking step,” while UK Prime Minister Keir Starmer said the deal “opens a new era in India UK trade ties. Business leaders from both countries, including CII President Sanjiv Puri, welcomed the agreement and said it provides long term clarity especially for small and mid size exporters.

The trade pact will now move through ratification processes in both countries before it comes into full effect.

Political Reactions and Final Summary

Leaders from both countries described the agreement as a strategic and economic breakthrough. Prime Minister Narendra Modi hailed the deal as a “historic moment” that would open new markets and strengthen India’s position in global trade. UK Prime Minister Keir Starmer called the FTA a “game-changing pact” and said it marked a new chapter in India–UK relations, focused on shared growth and innovation.

Opposition leaders in India, including Congress leader Jairam Ramesh, welcomed the deal but raised concerns about its impact on sensitive sectors like agriculture and MSMEs, calling for transparent implementation and safeguards. Industry associations, including FIEO and CII, also issued positive statements, highlighting opportunities for exporters and job creation in sectors such as engineering, garments, and processed food.

Experts believe the agreement will not only boost economic ties but also support deeper cooperation in defense, education, technology, and climate going forward.

With trade in goods, services, mobility, and regulatory cooperation covered under a single agreement, the India–UK FTA is now being seen as a template for future Indian trade deals with developed economies. The agreement will come into force after final ratification and legislative approvals in both countries.

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