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Source: Hindustan Times

Context

The signing of the Free Trade Agreement (FTA) between India and the United Kingdom is a watershed moment in India's relationship with Western countries. This accord is more than just a commercial deal; it represents India's growing confidence and assertiveness on the international stage.

About the FTA

A Free Trade Agreement (FTA) is an agreement between two or more countries that reduces or eliminates trade barriers such as tariffs, import quotas, and export restrictions.

FTAs attempt to make cross-border trade smoother, cheaper, and more predictable while also increasing trade volume.

Benefits of India-UK FTA for Indian Exports

• Zero Tariffs: 99% of Indian products entering the UK will face no tariffs.
• Increased Exports: Because the UK's market is now open to Indian goods with zero tariffs, Indian exporters will be able to send more products to the UK, including clothes, jewellery, electric vehicles, marine products, and generic medicines.
• Competitive Advantage: This provides India an advantage over countries such as China and Vietnam, whose goods will cost higher in the UK due to tariffs.
• India's exports to the UK are predicted to grow by 30-40%.
• Economic Impact in India: Increased exports imply the building of more factories, increased activity, and the creation of new jobs.
• We expect Gujarat, Tamil Nadu, and Maharashtra to benefit the most from rising export volumes.

Benefits of UK Exports to India

• UK exports including as Scotch Whisky, luxury vehicles (e.g., Jaguar Land Rover), cosmetics, and dairy products will see lower tariffs in India.
• For example, the present 150% tariff on UK whisky will be decreased to 75% immediately, and then to 40% over the next ten years.

Benefits of Services and Professionals

• Government bids: UK companies can now bid on bids issued by the Indian government.
• Easier Visas: Indian professions, such as yoga teachers, cooks, and computer workers, will find it easier to secure short-term (up to two years) visas to the UK.
• Social Security: If Indian workers already contribute to a similar system in India, they will be exempt from contributing to the UK's social security system.
• MSME Empowerment: Indian Micro, Small, and Medium Enterprises (MSMEs) are expected to benefit significantly since their products can now be sold in the UK market without tariffs.

Roadmap for India-UK Vision 2035

The India-UK Vision 2035 framework replaces the previous 'Roadmap 2030'. This outlines six major pillars of bilateral cooperation aimed at strengthening ties between the two countries across a variety of areas.

• The Trade and Economic Growth pillar focuses on strengthening commercial partnerships by signing the India-UK Comprehensive Economic and Trade Agreement (CETA) and seeking to develop a Bilateral Investment Treaty (BIT) to encourage cross-border investments and economic integration.
• Under Technology and Innovation, both governments have agreed to establish the UK-India Research & Innovation Corridor.
• Defence and security cooperation includes the collaborative development of critical military technologies, particularly Jet Engine Advanced Core Technologies (JEACT) and Electric Propulsion systems, as well as strategic convergence on regional security issues in the Indo-Pacific and Indian Ocean Regions.
• Climate and Clean Energy collaboration addresses important environmental issues by combining efforts in energy storage systems, grid transformation technologies, and offshore wind development.
• The Education and People-to-People relations pillar seeks to promote cultural and academic relations by encouraging the creation of UK university campuses in India, expanding educational possibilities, and cultivating stronger interpersonal linkages between the two countries.
• Multilateral cooperation entails coordinated advocacy for comprehensive reforms of major international institutions, such as the United Nations Security Council, World Trade Organization, World Health Organization, International Monetary Fund, and World Bank, in order to better reflect current global realities and ensure more equitable international governance.

Highlights of the India-UK Free Trade Agreement

Category	Details
Market Access	- 99% of Indian exports to the UK will be duty-free, covering nearly all trade value. - For the UK, 90% of tariff lines reduced, with 85% zero-duty within 10 years.
Key Sectors Benefiting	- Labour-intensive industries: marine products, textiles, chemicals, base metals, processed foods. - Tariffs: Processed food tariffs drop from 70% to zero; tea, coffee, spices, rubber, plastics get free access.
Agriculture	- 95%+ tariff lines zero-duty. - Products: Fruits, vegetables, pulses, spices, pickles, jackfruit, millets, organic herbs. - Exports could rise 20% in 3 years, helping reach $100B agri-export target by 2030. - Sensitive items protected: dairy, oats, apples, edible oils.
Marine Products	- Zero tariffs on shrimp, tuna, fishmeal, etc. - India’s current UK import share: 2.25%. - Growth potential: Could become a $5.4B export segment, boosting coastal economy.
Textiles & Apparel	- 1,143 product categories duty-free. - India’s UK market share may grow 5%. - Key items: ready-made garments, carpets, handicrafts, home textiles. - Levels playing field with Bangladesh and Cambodia.
Engineering Goods	- Current exports: $4.28B; UK imports globally $193.5B. - Tariffs up to 18% scrapped. - Exports may double to $7.5B by 2030.
Pharma & Medical Devices	- Tariff elimination on generics and devices. - UK pharma imports: $30B, India exports only $1B. - Products: ECG machines, X-ray systems, surgical equipment.
Chemicals & Plastics	- Chemicals: Exports to grow 30–40% to $650–750M by FY26. - Plastics: Focus on films, sheets, kitchenware; 15% growth targeted. - Competitive edge over global suppliers.
Toys, Sports, Jewellery	- Export advantage over China and Vietnam. - Jewellery exports may double in 2–3 years, tapping UK’s $3B market.
Leather & Footwear	- 16% duties removed. - Exports projected to exceed $900M. - Key hubs: Agra, Kanpur, Kolhapur, Chennai (MSME clusters).
Services & Professionals	- 75,000 Indians exempt from UK social security for 3 years. - 36 services sectors opened without Economic Needs Test. - Professionals can work in 35 UK sectors for 2 years. - Cultural visas for 1,800 chefs, yoga trainers, artists annually.

Impact of the India-UK Trade Deal

1. Gains for Indian Sectors

• The FTA provides expanded market access for India’s agriculture, processed food, textiles, footwear, seafood, gems and jewellery, and engineering goods.
  
  
• Reduced tariffs will make Indian exports more competitive in the UK.
  

2. Benefits for British Exports

• UK exporters gain easier access to India’s market for whisky, cars, and other British goods, boosting trade diversity.
  

3. Boost to Bilateral Trade

• UK exports to India are projected to grow by nearly 60%, adding £15.7 billion by 2040.
  
  
• Bilateral trade is expected to rise by 39%, contributing £25.5 billion annually compared to a no-deal scenario.
  

4. Services and Mobility

• The deal includes chapters on services, innovation, and intellectual property.
  
  
• It enhances mobility for Indian professionals.
  
  
• A Double Contribution Convention Agreement prevents Indian workers from paying social security in both nations.
  

5. Strategic Importance

• After India’s exit from RCEP (2019) over concerns of Chinese import surges, the deal reflects a strategic pivot towards Western economies, including the UK and EU.

Practice Question Q. Discuss how the India–UK Free Trade Agreement marks not merely an economic pact but a strategic realignment in the context of emerging multipolarity and post-Brexit recalibration of British foreign policy.