India and UK Sign Landmark Free Trade Deal, Set to Boost Annual Trade by $34 Billion

In a major breakthrough for global trade and diplomacy, India and the United Kingdom have officially signed a historic Free Trade Agreement (FTA) on Thursday, marking a new chapter in economic ties between the two nations. The deal, long in the making, was finalised in the presence of Prime Minister Narendra Modi and his British counterpart Keir Starmer, and is expected to boost bilateral trade by a staggering $34 billion annually.

This agreement, described by Indian officials as the most significant trade pact ever signed by India, eliminates duties on 99% of Indian exports to the UK. This sweeping tariff relief will benefit Indian textiles, pharmaceuticals, medical devices, leather goods, chemicals, and agriculture products, giving these sectors a competitive edge in the British market.

At the same time, British exports such as Scotch whisky, electric vehicles, luxury cars, and cosmetics will find it easier and cheaper to enter India. For instance, the import duty on Scotch whisky will be halved immediately to 75%, and gradually lowered to 40% over ten years. Likewise, electric vehicle tariffs will fall sharply from 110% to just 10%, albeit in a quota-based phased manner.

India has also agreed to reduce 90% of its tariff lines, cutting the average levy on UK products from 15% to just 3%, a move expected to significantly enhance UK’s trade access.

Beyond goods, the deal includes chapters on services, procurement, and intellectual property rights, addressing key concerns on both sides. Notably, British firms will now be allowed to bid for Indian government contracts at the federal level, opening the doors to a major new market. And despite earlier fears, India’s ability to export affordable generic medicines will not be compromised, officials confirmed.

The impact on various Indian industries could be transformative. Electronics and engineering exports are projected to double by 2030, chemical exports may grow by 30–40% in the coming fiscal year, and gems and jewellery exports, currently worth $941 million, are expected to double within three years. The leather sector alone could gain a 5% market share in the UK in just two years. Software services exports are forecast to grow by 20% annually.

UK Prime Minister Keir Starmer called the agreement a “landmark deal” that will create thousands of jobs, attract over £6 billion in new investments and export wins, and increase UK exports to India by nearly 60% in the long term. According to his office, over 2,200 new jobs will be created across the UK as Indian businesses expand their operations there.

For India, this deal is not just about numbers. It’s a strategic signal—a shift towards opening up trade, lowering barriers, and diversifying economic partnerships beyond traditional allies. Indian officials highlighted that the deal aligns with broader ambitions to position India as a global investment and manufacturing hub, especially in emerging sectors like green energy, fintech, and digital innovation.

Anil Talreja, Partner at Deloitte India, called the deal a “watershed moment,” saying it demonstrates a shared vision to deepen cooperation and strengthen resilience against external economic shocks.

While the bilateral investment treaty is still under negotiation, the FTA will now move forward for cabinet approval in India and ratification in the UK Parliament.

As the world’s most populous democracy and a major global economy, India’s move to embrace free trade on such a large scale signals a deeper integration into the global market—an evolution that may have ripple effects for other trade talks with the EU, US, and beyond.