The India-UK Free Trade Agreement (FTA) is a proposed agreement between the United Kingdom and India to promote business and investment between the two nations. It aims to lower or dismiss taxes, reduce restrictions, and enhance access to each other's demands for goods, services, and investments. 

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What is the India-UK Free Trade Agreement (FTA)?

India and the U.K. on Tuesday (May 6, 2025) locked an ambitious free business deal along with a dual contribution convention, with Prime Minister Narendra Modi declaring that the landmark agreements will catalyze trade, investment, development, and employment creation in both economies. 

The meeting builds upon the dialogues between the two Prime Ministers on the sidelines of the G-20 Summit in Rio de Janeiro, Brazil, in November 2024. Following the summit between the two Prime Ministers, intense Free Trade Agreement negotiations continued in February 2025, which was observed by several engagements between Shri Piyush Goyal, the minister of Indian Commerce and Industry, and the U.K. Secretary of State, Mr. Jonathan Reynolds, and their groups.

Prime Facts of the India-UK Free Trade Agreement:

• Trade Growth: Desired to increase bilateral business by £25.5 billion yearly by 2040.
• Whisky and Gin Tariffs: Tariffs decreased from 150% to 75%, eventually to 40% over 10 years.
• Automobile Tariffs: India will lower automotive tariffs from over 100% to 10%.
• Other Goods: Tariffs lowered on aerospace, cosmetics, medical, chocolate, devices, and more.
• Services and Work Permits: Advanced quotas for Indian workers in IT and healthcare, with 100 new visas yearly for professionals.
• Carbon Tax: Conflict over UK's offered carbon tax on metal imports.
• Supply Chain Resilience: The Free Trade Agreement seeks to lower dependency on China and enhance supply chain security.

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The India–UK Free Trade Agreement negotiations were formally established in 2022 to heighten economic collaboration and increase bilateral trade. As per the 2023–24 financial year data, the trade volume between the two countries gained $21.34 billion, a growth from $20.36 billion in the last fiscal year. Now, goods exported from India to the UK meet an average import duty of 4.2%. The two sides desire to conclude a Free Trade Agreement, a Bilateral Investment Treaty (BIT), and a social security agreement termed the Double Contribution Convention Agreement (DCAA).

Essential Demands of India

• India has been trying for more significant product market entry, especially in labor-intensive sectors such as garments, gems, textiles, and jewelry.
• India has reached for liberalization of the UK's visa authority to permit the movement of experienced professionals from IT-enabled services (ITeS), Information Technology (IT), and healthcare sectors.
• India has also demanded specific micro, small, and medium enterprises (MSMEs) provisions and requested flexibility regarding carbon emission standards.

Essential Demands of the UK

• The United Kingdom is willing to lower tariffs India charges on high-value commodities such as Scotch whisky, vehicles, electric, lamb meat, and chocolates. 
• It also aims to market legal, insurance, telecom, and financial services access.
• The UK is pushing for a sunset clause in the proposed Bilateral Investment Treaty, more significant flexibility on data localization, and recognition of its recent carbon tax regulations.

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Key Highlights of the India-UK Free Trade Agreement

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The India-UK Free Trade Agreement (FTA) offers numerous advantages for both nations. The agreement will lower tariffs. It will make Indian goods like pharmaceuticals, textiles, and agricultural products more affordable in the UK market. This enables Indian exporters to achieve more suitable access. UK companies will also benefit from smoothly joining India's increasing demand, mainly in legal services, education, and renewable energy sectors. The Free Trade Agreement will boost job creation, attract foreign investments, and help small and medium enterprises (SMEs). It facilitates technology transfer and innovation. The Free Trade Agreement improves economic growth, trade, and long-term strategic collaboration between India and the UK.

India's Signed Free Trade Agreements (FTAs)

• Signed Free Trade Agreements (FTAS): Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, Korea, Japan, Australia, UAE, Mauritius, ASEAN, and EFTA.
• Upcoming Free Trade Agreements (FTAS): India is negotiating FTAs with the UK, EU, and US to boost business with Western economies.

Aim of the India-UK Free Trade Agreement (FTA)

• Promote trade & investment by lowering tariff and non-tariff barriers.
• Develop possibilities in healthcare, technology, and education.
• Encourage students and professionals to engage in more effortless activity.

India's Gains from the Free Trade Agreement (FTA)

• Merchandise Business: Exports to the UK were $12.9 billion (FY24), with gains in textiles, apparel, footwear, cars, marine products, grapes, and mangoes.
• Tariff Removal Benefits: India will earn from duty cuts on $6.1 billion worth of goods.
• Market Entry in Services: Indian IT, healthcare, and education sectors will benefit.
• Grown Investments: The Bilateral Investment Treaty (BIT) will boost UK investments in India.

UK's Gains from the Free Trade Agreement (FTA)

• Tariff Decreases in India: The UK exports $8.4 billion to India, with 91% of products facing tariffs (e.g., cars – 100%, whisky – 150%).
• Better Entry to Indian Markets: UK products such as precious metals, machinery, make-up items, and scotch whisky will benefit from lower duties.

Challenges to the India-UK Free Trade Agreement (FTA)

• Tariff Negotiations: India is reluctant to reduce tariffs on UK goods like whisky, automobiles, and meat.
• Visa & Mobility Issues: India demands greater access for students and professionals, while the UK has tight visa policies.
• Bilateral Investment Treaty (BIT) Conflict Solution: India wants foreign firms to exhaust local remedies before arbitration, which the UK opposes.
• Regulatory Obstacles: The UK demands liberalization in India's legal and financial sectors, which faces resistance.
• Geopolitical Aspects: Domestic political changes and economic uncertainties can delay agreements.

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