[Answered] Assess the potential benefits and key features of the UK-India Free Trade Agreement (FTA) in light of the claim that it prioritizes tariff elimination on many goods and service sector liberalization for mutual economic gain. Briefly mention important goods likely impacted by tariff changes and discuss the FTA’s broader significance for UK-India economic and strategic ties.

Introduction

The India-UK Free Trade Agreement (FTA) 2025, signed on May 6 after three years of negotiation, represents a landmark in India’s trade diplomacy. It reflects the evolving Indo-Pacific trade architecture and mutual efforts to revitalize post-Brexit UK trade and diversify India’s export landscape. By prioritizing tariff reductions and services liberalization, the agreement aims to unlock a new era of mutual economic gain, job creation, and innovation.

Key Features and Goods Impacted by Tariff Changes

1. Tariff Reductions on Key Goods: Scotch whisky and gin: Tariffs slashed from 150% to 75% initially, to reach 40% by year 10. British automobiles: Tariffs reduced from over 100% to 10%, under a quota system. Other goods: Significant reductions on cosmetics, medical devices, aerospace parts, chocolate, lamb, salmon, and electrical machinery, making high-quality British goods more accessible to Indian consumers.
2. Liberalisation of Services Sector: Enhanced mobility quotas with ~100 additional annual visas for Indian professionals in IT, healthcare, and engineering. Provisions for mutual recognition of professional qualifications, aiding cross-border employment. IPR and digital trade provisions to bolster India’s IT, startup, and pharmaceutical sectors.
3. Investment and MSME Facilitation: Regulatory easing and compliance cost reduction for MSMEs. Special focus on green and digital sectors to attract bilateral investment.
4. Climate and Customs Cooperation: Acknowledgement of developing countries’ concerns in the UK’s carbon tax policies. Streamlined customs procedures to reduce non-tariff barriers.

Potential Benefits for Both Economies

1. India’s Export Competitiveness: Sectors like pharmaceuticals, textiles, auto components, rice, seafood, and spices stand to benefit from better UK market access.
2. UK’s Economic Relief: The UK, battling inflation and supply disruptions, gains access to affordable, high-quality Indian imports and robust service providers.
3. Employment and Entrepreneurship: Estimates suggest a £25.5 billion boost in trade by 2040, translating into job creation and MSME growth in both nations.
4. Consumer Benefits: Indian consumers benefit from cheaper British goods, while UK consumers access cost-effective Indian services and agricultural products.

Broader Strategic Significance

1. Post-Brexit Pivot: This is the UK’s most significant bilateral trade deal post-Brexit, shifting its focus from Europe to the Indo-Pacific.
2. Geopolitical and Economic Diplomacy: Strengthens India’s position amid global supply chain realignment under the China-plus-one strategy and rising protectionism.
3. Soft Power and Diaspora Engagement: Enhanced educational exchange, tourism, and professional recognition deepen people-to-people ties.
4. Template for Future FTAs: The agreement offers a blueprint for upcoming India-EU and India-US FTAs, especially in services liberalization and regulatory harmonization.

Conclusion

The India-UK FTA is a strategic and economic milestone, signaling India’s maturity as a trade power and its readiness to engage with advanced economies on equal footing. It combines tariff rationalization, services access, and sustainability commitments, reflecting the shared goals of inclusive growth and resilience. As both countries navigate complex global headwinds, the FTA stands as a model of proactive and balanced trade cooperation.