India and the UK recently signed a significant Free Trade Agreement (FTA) along with a Double Contribution Convention. The deal, finalized on May 6, 2025, aims to enhance access for India’s labour-intensive sectors such as textiles, leather, gems, and jewellery by eliminating tariffs as high as 18%. This creates a level playing field for Indian exporters competing with countries like Bangladesh and Vietnam in the UK market.
The agreement also boosts pharmaceuticals and ceramics sectors by simplifying regulatory pathways for generic drugs and encouraging joint research ventures. A notable highlight is the three-year exemption from UK social security contributions for Indian professionals working in the UK. This move reduces employment costs and encourages more Indian talent to work in the UK’s high-growth sectors, especially AI, deep tech, and cybersecurity.
However, to fully leverage the FTA, both countries must implement Mutual Recognition Agreements (MRAs) to reduce non-tariff barriers. Concerns remain over possible trade diversion from China through India. Hence, strong enforcement of Rules of Origin is essential. The FTA serves as a springboard for Indian industry to modernize, adopt global quality benchmarks, and strengthen its competitive edge in developed markets.