India, UK to seal landmark FTA today, eye $100 bn trade boom

India and the United Kingdom are set to sign a landmark Free Trade Agreement (FTA) on Thursday, resetting bilateral trade ties and potentially increasing two-way trade by billions of dollars annually.

The pact, officially called a comprehensive economic and trade agreement, will be signed in the presence of Prime Minister Narendra Modi and his British counterpart Keir Starmer.

Commerce and Industry Minister Piyush Goyal and his British counterpart Jonathan Reynolds would sign the agreement. Once the pact is signed, it will have to be ratified by both British and Indian Parliaments before it can take effect. The process may take about a year.

Before leaving for the UK, PM Modi on Wednesday said his meeting with Starmer would further enhance the economic partnership, fostering prosperity, growth and job creation in both countries.

Bilateral trade between India and the UK crossed a record $55 billion in 2024 and is projected to reach $100 billion within five years. The FTA will bring significant changes to trade dynamics. Nearly 90 per cent of UK exports, including aerospace products, spirits like Scotch whisky, cosmetics, salmon, chocolates, biscuits and medical devices, will become cheaper in India.

Tariffs on Scotch whisky and gin will immediately drop from 150 per cent to 75 per cent, eventually reducing to 40 per cent over 10 years. Similarly, duties on UK-made cars, currently exceeding 100 per cent, will be slashed to 10 per cent, enabling brands like Jaguar to expand in the Indian market.

On the other hand, nearly 99 per cent of India’s exports to the UK will benefit from the FTA, boosting sectors such as textiles, footwear, auto components, gems, jewellery, furniture, sports goods, chemicals and machinery. Some of these goods currently face UK tariffs between 4 per cent and 16 per cent.

Over 1,000 Indian companies operate in the UK, employing more than 1 lakh people and generating a collective turnover of over $91 billion. Meanwhile, around 700 British companies in India have a total turnover of $59 billion and employ over 5 lakh people. Indian firms have invested approximately $20 billion (Rs 1.73 lakh crore) in the UK, while British investments in India stand at $36 billion (Rs 3.11 lakh crore), making the UK India’s sixth-largest foreign investor.

A UK government assessment estimates that the FTA will boost Britain’s GDP by £4.8 billion and wages by £2.2 billion annually in the long run, while bilateral trade is expected to grow by £25.5 billion each year.

During his London visit, Modi will engage with Indian and British business delegations to strengthen trade ties and will also meet King Charles III at Buckingham Palace. The FTA includes a “youth mobility scheme”, permitting 3,000 young professionals from each country to live and work abroad for up to two years.

In New Delhi, the Union Cabinet, led by PM Modi, approved the final text of the FTA on Tuesday night. Down to the wire, legal teams worked late into the night to finalise the text after a thorough review. Earlier that day, Foreign Secretary Vikram Misri confirmed that last-minute legal checks were underway.

The FTA was announced on May 6 following a phone conversation between Modi and Starmer, with Misri calling it a “significant agreement”.