After painstaking negotiations for over three years, India and the United Kingdom (UK) marked a major milestone in bilateral relations on May 6, when the two countries finalised a Free Trade Agreement (FTA). The deal, linking the fourth and sixth largest economies in the world, aims to strengthen strategic partnership and boost trade between the two countries. In fact, the UK government has hailed it as “the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU.”
What is an FTA?
To put it in simple words, FTAs are treaties signed between two or more countries with the goal of doing away with or reducing trade barriers — these could include restrictions on imports and exports, tariffs, etc. Protecting investment interests and Intellectual Property Rights (IPR) also often fall under the purview of FTAs.
India-UK FTA: Key points
The FTA covers a wide array of Indian sectors and industries such as leather, textiles, IT services, agriculture, auto parts, engineering goods, organic chemicals, footwear and even jewellery. The figures are staggering, too. According to the government, in the coming five years — i.e. by 2030 — the deal aims to almost double bilateral trade from the existing USD 60 billion to USD 100 billion. As per the World Economic Forum, the FTA is expected to increase trade between India and the UK by USD 34 billion annually from 2040. One of the main highlights of the deal is that over 99 per cent of Indian exports to the UK will now be duty-free.
Labour-intensive sectors to gain Big
While the FTA encompasses a wide variety of sectors, it’s projected to be extremely beneficial for India’s labour-intensive sectors such as leather, textiles, agriculture, marine products, sports goods and toys, gems, footwear, and jewellery. With exports becoming tariff-free, the deal opens immense potential for Indian exporters in all these sectors. In a report, The Indian Textile Journal quotes Dr. Vijay Kalantri, President of the All India Association of Industries (AIAI), who says that the deal will give impetus to the country’s goal to hit USD 2 trillion in exports in the coming years.
Big boost for textile sector
Talking about labour-intensive sectors, let us take the apparel industry as an example. As per a report by the Financial Express, China is the largest exporter of readymade garments to the UK, followed by Bangladesh, Turkey and then India. While China’s share is 25 per cent, Bangladesh is closely behind with an impressive figure of 20 per cent. India, on the other hand, enjoys only a 6 per cent to 8 per cent share in UK’s apparel import.
One of the biggest obstacles faced by India has been the 12 per cent tariff imposed on its apparel imports by the UK. It is to be noted that at the same time, India’s competitors such as Bangladesh and Turkey have been enjoying duty-free exports. While the new FTA will give India a level playing field with these two countries, it will also give India an advantage over China, which continues to pay tariffs ranging from 8 per cent to 12 per cent for its textile/apparel exports to the UK. That’s not all; being the country with the largest population in the world, its manpower is India’s biggest advantage when it comes to industries that require a substantial workforce.
According to a Fibre2Fashion report, the trend in India’s textile and apparel exports to the UK for 2025 and 2026 looks promising. With figures of USD 2.4 billion and USD 2.8 billion respectively, it projects 15 to 20 per cent annual growth in exports, a direct impact of the recent trade agreement.
A Businessworld report, citing a study by India Ratings and Research (Ind-Ra), claims that India’s export to the UK market could expand between Rs. 45 billion and Rs. 70 billion in the long term. On the other hand, since India’s textile/apparel imports from the UK is negligible, it won’t hamper our domestic businesses. In short, it’s a win-win situation for India as far this sector is concerned.
Upbeat UK retailers
While many big names in the UK fashion industry have been sourcing textiles from India for long now, it’s set to accelerate further with the FTA. Here are some examples.
According to Fibre2Fashion, many significant UK retailers such as Next, Marks C Spencer, Dunhill, Burberry, JW Anderson and Clarks, among others, are treating India as a major source hub.
With many of them keen to look beyond Bangladesh and China, there’s also been a spurt in UK-India collaborations in the textile/apparel sector. Primark, for example, has joined hands with more than 150 factories in India, especially to source cotton textiles. Under its Sustainable Cotton Programme, the brand has already trained over 150,000 Indian farmers in quality and sustainability enhancement. Collaborations such as these are expected to grow further post FTA. Another prominent brand, Boden has also successfully collaborated with close to 20 Indian businesses with a focus on embroidered garments and leather footwear. With tariffs becoming zero, it’s only natural that India will attract more such ventures.
Job opportunities galore
With increased exports and rise in the number of Indo-UK collaborations, it’s obvious that the coming years will see a growth of employment opportunities in the textile/apparel sector. However, it is not limited to this industry alone. Apart from labour-intensive sectors, the FTA will facilitate job creation in sectors such as IT, financial services, architecture, engineering, and education. One of the major highlights of the FTA is the lucrative opportunity that has been created for Indian professionals on short-term assignments in the UK. Unlike now, they will be exempt from paying National Insurance contributions for three years, ending double taxation (in India and the UK). Experts say this step is likely to save our workers in the UK around 20 per cent of their salary.
A promising future
As per a report by The Economic Times, India ranked 11th among UK’s trading partners in 2024, with us contributing around 2.4 per cent to their total trade. It is to be noted that textiles/apparels were among the top five sectors that exported their products to the UK, with the others being refined oil, medicinal and pharmaceutical products, telecom and sound equipment, and iron C steel. With the FTA expected to give a big boost to bilateral trade, it looks like we are scripting a growth story, with more opportunities for jobs, exports and investments in the coming years.