On 6 May 2025, the United Kingdom (UK) and Indian Governments agreed a new ‘landmark’ free trade agreement (“FTA”) to increase long-term bilateral trade by £25.5 billion each year and drive economic growth in both countries. The UK Government believes the FTA will result in a £4.8 billion increase in UK GDP and a £2.2 billion increase in UK long-term year-on-year wages.
The legal text of the agreement and regulatory details must first be finalised, after which it will proceed through the relevant domestic approval procedures before final ratification and implementation. This could be a lengthy process.
The FTA is believed to be a significant development in access to the Indian market due to the considerable trade barriers that India has in place, including high tariffs on imports and customs procedures which have acted as barriers to foreign companies looking to enter and/or expand into India. The FTA aims to reduce the unpredictability, administrative burdens and costs for British businesses in entering or expanding into India and vice-versa.
Key changes:
The FTA aims to reduce such barriers and facilitate more streamlined trade processes between the UK and India, most notably by:
- Reduced Tariffs: the UK will eliminate tariffs on 99% of imported Indian goods. In return, India will remove or reduce tariffs on 90% of tariff lines covering 92% of current Indian-imported goods based on 2022’s figures (amounting to a cut of approximately £400 million in tariffs, which will reach approximately £900 million in 10 years). 64% of tariff lines (including advanced manufacturing and agrifoods) will be tariff-free from day one of the FTA’s implementation, with gradual ‘staged’ tariff-free eligibility to 85% of tariff lines over 10 years (including for automobile parts, medical devices, and selected alcoholic beverages).
- Easing Customs Procedures: India and the UK jointly commit to simplifying customs timeframes and reducing administrative burdens to provide greater imports certainty, which includes: releasing goods not requiring physical examination within a target of 48 hours, providing opportunities to defer payment of customs duties until goods are received, and allowing customs duty payments for regular imports on a periodic basis instead of a per-import basis..
Other changes
Additionally, the FTA does the following:
- Establishes mechanisms for raising disputes or remedies to unfair trade practices, for example the ‘bilateral safeguard mechanism’ in which either the UK or India can temporarily unilaterally suspend the concessions on tariffs when domestic industries face injury e.g., from dumping.
- Agrees initiatives to assist UK SMEs in navigating entry or expansion into the Indian market.
- Agrees rules of origin to allow UK manufacturers to continue using materials sourced from third countries in finished products exported to India under the FTA’s tariff arrangements.
- In the event that India agrees better trade terms with a third country, the UK has mechanisms to return to negotiations to seek the same.
Baker McKenzie’s India Practice
Baker McKenzie has a dedicated Global India Practice, one of the largest amongst the international law firms. We have over 300 lawyers actively working across 70 offices on India-related matters, which positions us as a leading firm in supporting international clients seeking to do business with India and in supporting Indian clients seeking to enter or expand into the UK.
Our pool of legal talent and track record has been recognised by several industry awards, as demonstrated by Baker McKenzie being a three-time winner of the ALB India Law Awards’ International Law Firm of the Year award and our ranking as Band 1 in Foreign Law Firms for India-related work by the India Business Law Journal for the past seven consecutive years.
Baker McKenzie’s Spotlight on India
The authors acknowledge the assistance of Daniel Quirk with the preparation of this blog post.
