The India-UK Free Trade Agreement – key implications and takeaways

Introduction

On 6 May 2025, the UK and India signed the long-awaited Free Trade Agreement (FTA), expected to double bilateral trade and unlock cross-sector opportunities. A month later, UK Foreign Secretary David Lammy and India’s Commerce Minister Piyush Goyal met to discuss key implementation issues, with Prime Minister Keir Starmer planning a summer visit to formally sign the FTA. 

Drawing on our expertise in international trade agreements, we anticipate the FTA will cultivate greater collaboration and interaction on areas of mutual interest between India and the UK, benefiting both governments and businesses. The publicly available information so far indicates promising outcomes, particularly for corporations operating within the highlighted sectors.

1. The FTA is designed to improve market access and liberalise various sectors, facilitating smoother trade operations. Critically, UK companies are set to gain better access to Indian public procurement and government contracts, opening new avenues for business. Economically, the agreement holds substantial promise.
2. The FTA is projected to at least double bilateral trade in goods and services, reaching approximately USD 120 billion by 2030. This could provide a significant annual boost of USD 6.4 billion to the British economy, coupled with an estimated USD 2.9 billion in increased wages. On the Indian side, significant job creation is anticipated, particularly in labour-intensive sectors like textiles, leather, and services. Indian exporters, in particular, will benefit from reduced tariffs, creating opportunities worth USD 19.7 billion for ready-made garments and USD 4.2 billion for home textiles.
3. The FTA is expected to deliver particular benefits across several key sectors. This includes IT and services and the automotive industry. Additionally, the agreement is set to boost the import and export of specific goods, such as alcoholic and non-alcoholic beverages, chocolate, auto parts, machinery, and tools.
4. Once ratified, it will become the UK’s fourth-largest trade agreement by volume—after those with the EU, Australia, and Japan.

Seizing the Opportunities

The FTA unlocks significant opportunities for both the UK and India.

1. The FTA will enhance access to India’s professional services market, covering areas like IT, accounting, and architecture. This means easier cross-border service delivery and increased talent mobility through mutual recognition of qualifications and relaxed visa rules. 
2. We also expect to see greater technical cooperation in advanced fields like AI, quantum computing, and cybersecurity, alongside stronger IP protection. This should lead to safer technology transfer and more joint ventures. The regulatory framework aims to improve cross-border data flows, digital payments, and cloud services, a boost for fintech and e-commerce.
3. A major benefit will be tariff reductions and removals, which will significantly increase trade volume and product competitiveness. India stands to gain from near-eliminated tariffs on its exports to the UK, while the UK will get better access to India’s large consumer market and diversify its supply chains. Reduced tariffs on cars and certain alcoholic beverages are also expected to greatly benefit those industries. 
4. A potential UK-India Bilateral Investment Treaty, possibly including an investor-state dispute settlement mechanism, would offer greater security for investments in sectors like renewable energy and infrastructure. This would be a positive signal for investors.  
5. The FTA is expected to facilitate greater financial and capital market access through mutual recognition and enhanced regulatory cooperation between the UK’s Financial Conduct Authority, India’s Securities and Exchange Board, and the Reserve Bank of India.

Navigating the Challenges 

While the FTA is a positive development, businesses should be prepared for certain challenges. A complex and rapidly evolving regulatory environment persists, and divergent data protection standards will require careful attention. Furthermore, potential practical challenges may arise from non-tariff barriers like licensing restrictions, customs procedures, and varying standards.

1. The complex and rapidly evolving regulatory environment will require careful review of rules like ‘Rules of Origin’ and ‘Make in India’ policies, potentially creating operational challenges. 
2. IP risks may arise from differing data protection standards and variations in IP protection and enforcement, especially for pharmaceuticals and technology. 
3. Non-tariff barriers such as licensing restrictions, customs procedures, and varying standards could still pose practical difficulties. 
4. Businesses will also need to closely assess transfer pricing, tax structuring, and indirect tax implications as duties and tax exposures may change.

Despite these hurdles, the FTA is an encouraging development, promoting free trade while actively working to decrease bureaucratic hurdles.

This material is for general information purposes only and is not intended to constitute legal or other advice. The contents of this publication do not constitute any opinion or determination of Indian law by us. Any comments in this publication are based on our experience as international counsel representing our clients in their deals and disputes which may have a connection with India. Freshfields does not practise Indian law and where Indian law advice is needed, we work alongside leading Indian counsel.