The UK-India FTA: A Bold Leap or a Calculated Bargain?
India and UK PMs Narendra Modi and Keir Starmer (Image credit X.com)
India-UK Free Trade Agreement: Landmark Deal Sparks Optimism, But Fine Print Raises Questions
By P. Sesh Kumar
NEW DELHI, May 6, 2025 — In what is being hailed as a “new era of economic partnership”, the Free Trade Agreement (FTA) between India and the United Kingdom triggered waves of optimism, cautious applause, and a few raised eyebrows.
The Government of India’s official press release trumpets the deal as a “landmark” and “ambitious” pact—India’s first with a developed Western nation—projected to double bilateral trade by 2030.
But scratch the surface of the celebratory headlines, and you begin to see the fine print that demands a deeper and more critical reading.
Let’s begin with what the press release wants us to notice. The FTA promises substantial tariff reductions across a range of sectors: Indian textiles, garments, and footwear will get preferential market access to the UK, while UK exports in machinery, whisky, cars, and chemicals will face reduced or zero tariffs in India.
There’s a bold pitch on services too, with mobility pathways for Indian professionals and streamlined business visa processes. The narrative is one of mutual benefit, trade liberalization, and deepened trust between two democracies post-Brexit.
On the face of it, India gains considerably in sectors where it has traditional strengths—especially in labour-intensive manufacturing and IT-enabled services.
There’s also a political win: the UK becomes the first G7 nation to sign an FTA with India, strengthening India’s image as a global trade player ready to step beyond its traditionally cautious FTA strategy.
The deal could especially benefit exporters from Tamil Nadu, Gujarat, and Punjab—regions heavily invested in garments, auto parts, and agri-processing.
But behind the celebratory tone of the press release lies a subtler story—one that requires careful parsing to understand what has really been won and what has been conceded.
While the government states that 90% of Indian exports and 92% of UK exports will see tariff reduction or elimination, it remains quiet on which “sensitive sectors” have been left out.
Is agriculture off the table entirely? What about data localisation requirements or digital services tax demands from the UK side? These silences are telling.
And then there’s the issue of asymmetry. India, despite being the larger economy in population terms, has a much smaller per capita GDP and faces a growing informal labour crisis.
A blanket liberalization with a mature, services-oriented economy like the UK could disproportionately benefit British firms in high-end financial services, legal consultancy, and high-value engineering—areas where India’s domestic industry is still catching up.
The UK’s whisky lobby, for instance, stands to gain significantly with tariff cuts on aged spirits. The question is: what exactly did India get in exchange? Preferential access to textile markets is good, but hardly revolutionary.
What’s also missing in the euphoria is a serious estimation of net gains over the pre-FTA status. Before the FTA, UK was already a relatively open market for many Indian goods due to WTO bindings and its need to diversify trade post-Brexit.
Indian software exports, for example, faced no major barriers in the UK market. So, while the FTA offers marginal improvement in ease of doing business and perhaps some goodwill in the visa regime, the true delta in trade benefit for India, especially in the short term, may not be as dramatic as the headlines suggest.
Moreover, any FTA must be judged not only by what it includes, but also by what it defers. The agreement, as per the government note, is only the “first phase” of a “comprehensive economic partnership.”
This phased approach is pragmatic, but it also means that difficult issues—such as investor-state dispute mechanisms, financial services regulation, and intellectual property rights—have been kicked down the road. These are precisely the areas where India has traditionally had friction with Western partners, and their eventual negotiation may involve tougher trade-offs.
Also unclear is how the FTA aligns with India’s Atmanirbhar Bharat (self-reliance) campaign. Does liberalizing tariffs for premium British goods, from cars to cheese, clash with domestic industry protection goals? Or is it seen as a trade-off for boosting Indian access to the UK’s services sector? The government does not clarify this contradiction.
On the geopolitical front, the FTA does carry weight. It signals India’s pivot toward bilateralism amidst the paralysis of the WTO and comes at a time when both nations are seeking to decouple, in part, from China. But trade strategy should not be driven by diplomacy alone. It should be shaped by cold economics—and here, India must be watchful.
To be fair, all FTAs are works in progress. They are as much about signaling long-term intent as they are about immediate trade volumes. In this light, the UK-India FTA is a commendable leap forward.
But its true benefits will lie not in the tariff tables, but in the implementation architecture, dispute resolution mechanisms, and whether it empowers Indian exporters or leaves them exposed to predatory competition.
The India-UK FTA is like a well-wrapped gift—it looks promising from the outside, but the real value lies in what lies within and how it’s used. For now, the press release offers a persuasive first act. But the curtain is yet to rise on the rest of the play. Time, trade data, and deeper scrutiny will tell whether this was a masterstroke or a mixed bag dressed in diplomacy.
(This is an opinion piece; views expressed solely belong to the author)
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