On July 24, 2025, India and the United Kingdom signed a landmark Comprehensive Economic and Trade Agreement (CETA), concluding nearly three years of complex negotiations. This Free Trade Agreement (FTA), covering 27 chapters, marks a significant shift in the bilateral trade landscape, aiming to deepen economic integration, enhance regulatory cooperation, and open new frontiers for business. This article analyses the India-UK FTA from both a legal and business perspective, focusing on the opportunities it creates, and the challenges stakeholders must navigate.
Legal Architecture of the Trade Agreement
The India-UK FTA sets out a broad legal framework encompassing goods and services trade, investment facilitation, intellectual property rights, mobility of professionals, dispute resolution, and anti-corruption standards. The agreement reflects modern trade norms and draws from the UK’s post-Brexit agreements with countries like Australia and New Zealand.
Following the agreement in principle reached in May 2025, both sides conducted a joint “legal scrubbing” to ensure consistency and clarity. The agreement is now pending ratification by the UK Parliament, expected to be completed within a year.
One of the key legal debates has emerged around the chapter on intellectual property rights (IPR). While it aims to improve enforcement and harmonisation, civil society groups warn that it may restrict India’s ability to use compulsory licensing, especially in pharmaceuticals, potentially affecting public access to affordable medicines.
Another notable legal inclusion is the anti-corruption chapter, which mandates the adoption of UNCAC-aligned standards, enhanced whistle-blower protection, and transparent procurement practices. This makes the India-UK FTA one of the most progressive in terms of governance.
The provisions on temporary movement of professionals provide legal certainty for Indian business visitors, intra-company transferees, and independent professionals. Notably, a three-year social security exemption is included, eliminating dual contributions and lowering the cost of cross-border employment.
This blog is a part of our Navigating foreign investment in India: Key legal aspects for Success Blogpost.
Business Implications
The FTA offers broad commercial benefits through tariff reductions, improved market access, and streamlined regulatory processes. Indian exporters will benefit from duty-free access on nearly 99% of their current exports to the UK. Key sectors such as textiles, apparel, gems and jewellery, engineering goods, processed foods, and seafood are expected to see a significant increase in competitiveness.
On the UK side, exporters of alcohol and automobiles stand to gain. For example, tariffs on whisky and gin will be reduced from 150% to 40% over ten years. Auto exports will see phased tariff reductions from over 100% to 10%, albeit within specified quotas to protect India’s domestic industry.
Service sectors also see liberalisation under the agreement. IT, healthcare, education, engineering, and legal services are expected to benefit from easier mobility provisions and mutual recognition of qualifications. Digital trade provisions also aim to streamline cross-border data flows and protect e-commerce investments.
While a standalone Bilateral Investment Treaty (BIT) remains under negotiation, the FTA introduces measures promoting regulatory predictability and investment protection. These include transparent licensing requirements and a framework for investor-state dispute settlement, paving the way for increased UK investments in India.
Sector-Specific Impacts
Textiles and Apparel: Indian textile exporters will benefit from the elimination of UK tariffs in the 8–16% range. States like Tamil Nadu, Gujarat, and West Bengal with strong garment and apparel clusters are expected to see a surge in orders and employment generation. The FTA also provides provisions on technical standards and labelling requirements to ease market access.
Pharmaceuticals: While Indian pharmaceutical companies can access the UK market more easily, concerns remain about stricter IP enforcement. This could increase costs for generic manufacturers. However, regulatory harmonisation and fast-track approvals for Indian drugs could open opportunities for exports of over-the-counter and wellness products.
Engineering and Auto Components: Indian auto parts and engineering goods manufacturers; particularly in Maharashtra and Punjab can tap into the UK’s high-end manufacturing supply chains. Reduced tariffs and mutual conformity assessment in mechanical goods are likely to fuel exports from India’s MSME engineering clusters.
Food Processing and Agriculture: Indian processed food products, including ready-to-eat meals, marine goods, and spices, will gain from tariff elimination and relaxed sanitary and phytosanitary standards. Kerala (seafood), Andhra Pradesh (spices), and Punjab (processed dairy) could see a notable boost.
Gems and Jewellery: The removal of duties on gems and jewellery will directly benefit exporters in Surat and Jaipur. The UK’s demand for certified diamonds and ethnic jewellery aligns well with India’s design strengths.
Alcoholic Beverages: Indian spirits manufacturers face tough competition from the UK as British liquor brands enter India with reduced tariffs. However, Indian companies could also benefit from export opportunities in low-alcohol beverages and niche segments.
Fintech and Financial Services: The FTA includes provisions for financial services liberalisation, including the facilitation of cross-border fintech operations. UK firms gain greater access to Indian capital markets, while Indian startups can explore sandbox environments in the UK to scale their offerings.
Education and Professional Services: Provisions supporting mobility, mutual recognition of qualifications, and digital delivery mechanisms enhance opportunities for Indian edtech firms, universities, and legal/accounting professionals to collaborate or enter the UK market.
Regional and Sectoral Impact in India
States such as Gujarat, Rajasthan, Punjab, and Tamil Nadu which are well-known for their strengths in textiles, engineering, and pharmaceuticals are positioned to be major beneficiaries. MSMEs across these regions could see expanded export opportunities, though they must align with compliance requirements to fully benefit.
However, smaller businesses may find it challenging to comply with Rules of Origin (RoO), certification mandates like BCI and OEKO-TEX, and sustainability benchmarks. These costs could offset some of the tariff advantages, especially for firms without the scale to absorb regulatory overhead.
Compliance and Legal Risks
The legal complexity of RoO requirements could lead to missteps among exporters unfamiliar with the documentation and supply chain tracing obligations. Non-compliance may result in denial of tariff benefits or retroactive duties.
Intellectual property clauses may increase enforcement obligations and costs, particularly for generic drug manufacturers. The risk of litigation in both domestic and international forums is likely to rise.
Another risk stems from the UK’s upcoming Carbon Border Adjustment Mechanism (CBAM). This carbon tax on imports could add over $775 million annually in costs to Indian exports of steel, aluminium, and fertilisers by 2027, unless mitigated by carbon credits or exemptions.
The FTA establishes a tiered dispute resolution process with consultations, arbitration panels, and compliance mechanisms. Legal advisory will be critical in managing trade-related litigation and securing remedies under the agreement.
Strategic and Future Outlook
Although the UK represents under 4% of India’s global exports, this FTA holds strategic weight. It acts as a post-Brexit model for future UK FTAs and as a blueprint for India’s prospective deals with the EU, US, and Canada. The agreement also reinforces India’s positioning as a rules-based economy open to global integration.
To maximise benefits, businesses must actively engage with the agreement’s schedules, consult legal experts for compliance, and invest in ESG and digital capabilities. The FTA’s success will depend largely on its implementation by governments, uptake by industry, and monitoring by legal professionals.
Legally sophisticated and commercially promising
The India-UK Free Trade Agreement is a legally sophisticated and commercially promising development in global trade. While it unlocks several high-growth opportunities across sectors and geographies, realising these benefits will require proactive compliance, legal vigilance, and strategic investment.
For businesses navigating this new landscape, engaging experienced legal and regulatory professionals will be crucial in transforming treaty potential into tangible advantage.
