India-UK Free Trade Agreement Signed: A New Era for MSMEs, Youth, and Cross-Border Trade

In a historic move that marks a new chapter in bilateral trade relations, India and the United Kingdom formally signed the Comprehensive Economic and Trade Agreement (CETA) — a wide-ranging Free Trade Agreement (FTA) designed to invigorate cross-border commerce, strengthen MSMEs, and create opportunities for youth, farmers, and professionals. The signing took place in London, witnessed by Prime Minister Narendra Modi and his British counterpart Keir Starmer, along with Commerce and Industry Minister Piyush Goyal and the UK’s Secretary of State for Business and Trade Jonathan Reynolds.

This ambitious trade pact is projected to boost the UK economy by £4.8 billion, raise wages by £2.2 billion annually, and increase bilateral trade by £25.5 billion per year, according to long-term estimates. PM Modi, while addressing the Indian diaspora in London, called the agreement “a win-win deal” and said it would “enhance prosperity, growth, and job creation for our people.”

A Transformational Opportunity for Indian MSMEs

One of the most significant benefits of this FTA lies in its targeted support for India's Micro, Small, and Medium Enterprises (MSMEs). With 99% of Indian exports now enjoying duty-free access to the UK, Indian MSMEs, particularly those in textiles, leather, jewellery, chemicals, plastics, and agricultural products, are set to witness an exponential rise in global competitiveness.

Traditional Indian exports like clothing, home textiles, carpets, and footwear, which currently face UK import duties of 8% to 16%, will now enter the British market duty-free. This move will benefit clusters such as Tiruppur, Surat, Ludhiana, and Agra, where thousands of MSMEs form the backbone of the local economy.

Similarly, gold and diamond jewellery, along with leather goods, will also enter the UK duty-free, offering a much-needed boost to small-scale artisans and exporters, especially from states like Rajasthan, Gujarat, and Tamil Nadu.

Boosting Agriculture and Rural India

The FTA offers a remarkable edge to Indian agricultural and marine exporters by slashing tariffs on basmati rice, shrimp, tea, and spices, thereby opening up new possibilities for farmers and cooperatives in states such as Assam, Kerala, Gujarat, and West Bengal. The zero-duty access aligns with India’s broader goal of improving rural incomes and increasing agri-export competitiveness.

However, to safeguard domestic sensitivities, the agreement smartly excludes dairy products, apples, cheese, sugar, milled rice, pork, and poultry, reflecting a nuanced and calibrated approach to trade liberalisation.

Services Sector and Professional Mobility

Perhaps the most understated yet powerful dimension of this agreement is its emphasis on services trade, which already exceeds goods trade between the two nations. In FY2024, India exported $19.9 billion worth of services to the UK, compared to $14.5 billion in goods exports.

Under the FTA, visa processes for Indian professionals will be streamlined, enabling smoother movement of engineers, architects, accountants, and consultants for project-based roles, intra-company transfers, or attending conferences. Furthermore, mutual recognition of qualifications will make it easier for Indian professionals to work and thrive in the UK job market.

This access, while still limited in comparison to the UK’s entry into the Indian financial and telecom sectors, is seen as a pivotal step in supporting India’s skilled workforce.

Enhanced Market Access and Trade Facilitation

India has also agreed to cut tariffs on Scotch whisky from 150% to 30% over 10 years, benefiting UK exporters and Indian consumers alike. In a reciprocal move, Indian-made machinery, tools, auto components, EVs, and hybrids will get preferential access to the UK market, particularly boosting MSMEs and mid-size firms in Pune, Chennai, Gurgaon, and other manufacturing hubs.

With the inclusion of digital trade and paperless customs systems, businesses on both sides can expect faster clearance, reduced paperwork, and cost-effective logistics, especially critical for MSMEs engaging in cross-border e-commerce.

Institutional Reforms: Social Security and IP Framework

Adding further depth to this economic engagement, both nations signed a Double Contributions Convention (DCC) — a framework that ensures Indian employees working in the UK and vice versa are liable to pay social security contributions only in their home country. This measure will save up to 20% of salary costs and is estimated to benefit over 60,000 IT sector employees, translating into collective savings of Rs. 4,000 crore for Indian firms.

On the intellectual property front, India has agreed to certain IP norms that go beyond WTO rules, primarily to ensure smoother UK access to Indian pharmaceutical and digital markets. While this has sparked concerns regarding potential barriers to affordable medicine access, especially in the generics market, industry experts believe the benefits may outweigh the risks if domestic IP management is carefully restructured.

Concerns and Cautionary Notes

While the deal is largely hailed as a progressive and growth-oriented accord, it has not been without its criticisms. According to a report by GTRI (Global Trade Research Initiative):

• Reducing import duties on UK cars from over 100% to 10% may hurt domestic automakers and millions of related jobs.

• Wide access to Indian government tenders for UK firms could potentially displace local suppliers, particularly in sensitive sectors.

• The absence of carbon tax exemptions for Indian exports like steel and aluminium may reduce their competitiveness in the UK market.

• The tariff revenue loss from this deal could amount to £900 million over the long term.

However, policymakers have emphasised that the gradual phasing of duty cuts and the limited number of tariff lines affected will provide ample buffer time for domestic industries to adapt and innovate.

Conclusion: A New Strategic Frontier

The India-UK Free Trade Agreement signifies more than just an economic alliance — it is a geopolitical and developmental partnership, crafted with a focus on inclusivity, modernisation, and global integration. For MSMEs, professionals, farmers, and manufacturers, the FTA presents a landscape of unprecedented opportunities.

As 2025 marks the UN-designated International Year of Cooperatives, the FTA aligns perfectly with India’s agenda of empowering grassroots entrepreneurship and enhancing global trade connectivity. While the road ahead must be tread with caution and policy vigilance, this agreement marks a significant milestone in India's journey toward becoming a $5 trillion economy — one that is competitive, inclusive, and future-ready.