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1. Executive summary

His Majesty’s Government has negotiated a Free Trade Agreement (FTA) between the United Kingdom (UK) and the Republic of India. It is a modern and comprehensive agreement which reduces the tariffs and non-tariff measures imposed on businesses, making it easier to trade. The FTA aims to create greater certainty and transparency for businesses involved in bilateral trade. This FTA will stimulate economic growth across the UK and support jobs. The UK’s gross domestic product (GDP) is estimated to increase by 0.13%, equivalent to £4.8 billion, and India’s GDP by 0.06%, equivalent to £5.1 billion per year in the long run.

This is an FTA between the world’s fifth and sixth largest economies, who are expected to maintain strong economic prominence in decades to come.^{[footnote 1]} By 2035, the UK is projected to remain the world’s sixth largest economy and India is projected to be the third.^{[footnote 2]} India had a nominal GDP of over £3 trillion in 2024 and is projected to grow rapidly with an estimated average growth rate of 5% per annum (in real terms) between 2021 and 2050.^{[footnote 3]} Furthermore, by 2050, India is projected to have over a quarter of a billion high-income consumers.^{[footnote 4]}

Total trade in goods and services between the UK and India was over £40 billion in 2024.^{[footnote 5]} India’s demand for global imports is estimated to increase to £2.8 trillion by 2050, making it the third largest importer in the world.^{[footnote 6]} The FTA’s improved market access and reduced regulation are expected to create major opportunities for UK businesses and consumers.

1.1 The agreement

The agreement with India is the UK’s biggest and most economically significant new bilateral FTA since leaving the EU. It represents the latest step by the UK and India to strengthen their relationship, building on the Technology Security Initiative, and the UK-India Comprehensive Strategic Partnership, which centres the relationship on mutual economic growth, technological innovation, and collaboration on global challenges including climate change.^{[footnote 7]}

The agreement supports the government’s Plan for Change, which aims to bring more opportunity to UK businesses within its core mission to grow the economy.^{[footnote 8]} It also builds on the Department for Business and Trade’s (DBT) UK Trade Strategy, which aims at achieving long-term sustainable, inclusive, and resilient growth through trade.^{[footnote 9]}

The FTA with India:

• removes or reduces tariffs on 90% of tariff lines, covering 92% of India’s goods imports from the UK in 2022 after staging (up to 10 years). This includes key UK exports such as whiskies and gin from 150% to 75% at entry into force and 40% after staging. Similarly, UK car manufacturers can benefit from a quota reducing the tariff from up to 110% to 10%
• minimises customs-related administrative burdens for traders and commits UK and India’s customs authorities to endeavour to release goods from customs control within 48 hours, if all requirements have been met
• reduces technical barriers to trade by making it simpler for UK manufacturers to test their products against Indian rules
• guarantees access for the UK’s world-class services industry. The FTA ensures a range of sectors such as financial services, environmental services and construction services are treated fairly when providing services in India
• secures commitments on digital trade to promote digital system compatibility and paperless trade. This will help UK businesses of all sizes by making trade cheaper, faster, easier and more accessible
• will set up bespoke support forÌýsmall and medium-sized enterprises (SMEs), such as dedicated contact points, helping them as they enter the market and trade with India
• maintains the UK’s high standards on important consumer issues such as food standards and animal welfare. On food standards, all food and drink products imported into the UK will continue to have to comply with UK import requirements
• will support the UK’s climate and environment goalsÌýand support cooperation and trade in key UK growth sectors such as clean energy, transport, recycling, as well as the circular economy
• contains commitments on areas India has never previously included in FTAs such as gender equality, development and State-Owned Enterprises (SOEs)

Alongside the FTA, the UK and India also pursued agreement of a new Double Contributions Convention (DCC), which will be a standalone treaty. The UK and India have committed to negotiate a DCC, and further information on the DCC can be found in the UK-India trade deal: conclusion summary.^{[footnote 10]}

1.2 The impact of the agreement

This impact assessment (IA) sets out the government’s analysis of the economic, social, and environmental impacts of the FTA. It seeks only to assess the marginal impacts of the FTA itself and is not a full forecast of all the ways in which the UK and Indian trading relationship may change in the coming years.

1.3 Macroeconomic impacts

This trade agreement will lower India’s high tariffs, enhance market access, and provide greater certainty, thereby supporting bilateral trade in goods and services. Import duties on UK exports are estimated to reduce by around £400 million as soon as the FTA comes into force.^{[footnote 11]}These import duty reductions are expected to double to approximately £900 million after 10 years, when full staging is complete. In addition, duties on UK imports from India will be reduced by £220 million.^{[footnote 12]}

Tariff reductions, combined with a reduction in regulatory barriers to trade between the UK and India are estimated to:

• increase UK exports to India by nearly 60% in the long run – this is equivalent to an additional £15.7 billion of UK exports to India when applied to projections of future trade in 2040^{[footnote 13]}
• increase UK imports from India by 25% in the long run – this is equivalent to £9.8 billion in additional UK imports from India when applied to projections of future trade in 2040. UK consumers can benefit from cheaper and more varied access to goods and services from India
• increase bilateral trade by nearly 39% in the long run, equivalent to £25.5 billion a year

The increase in trade is estimated to contribute to a permanent increase in the level of UK GDP of 0.13%, worth £4.8 billion a year when compared with projected levels of GDP by 2040, relative to a baseline of no agreement. Real wages for UK workers is estimated to increase by 0.19%, the equivalent of £2.2 billion a year for the whole country, compared with wages in 2024 without the agreement.

Modelling the long-run benefits of any FTA is always open to significant uncertainty. That uncertainty increases for an FTA involving an economy as dynamic as India’s. If India grows significantly faster or slower than projected during this period, or develops different sectoral strengths, this could influence the estimated impacts of the agreement. Such changes may have a knock-on effect on the scale and distribution of the benefits. Indeed, since just 2019 (when the Global Trade Analysis Project (GTAP) model dataset is set), bilateral trade between the UK and India has nearly doubled.^{[footnote 14]} As such these estimates could underestimate the ultimate impact of the FTA. It is not feasible to credibly model the many ways in which that forward trajectory could change over such a long period. However, the sensitivity analysis shows that in 90% of modelling simulations, the increase in UK GDP ranged between 0.11% and 0.14%.^{[footnote 15]}

Sector impacts

UK exports to India are expected to increase across all UK sectors. Sectors that experience the largest estimated increases in exports (in absolute terms) because of the agreement are the manufacture of machinery and equipment not elsewhere classified (n.e.c) – which includes pumps and engines – and chemical, rubber and plastic products – which includes products such as cosmetics and pharmaceuticals.

UK exports of beverages and motor vehicles are also likely to see large increases – driven by significant tariff reductions. Indian tariffs on whiskies will fall from 150% to 40% over 10 years. Correspondingly UK beverage and tobacco exports could increase by around £700 million – equivalent to around 180% growth relative to a baseline of no FTA.^{[footnote 16]} Similarly, Indian tariffs on UK completed motor vehicle exports, currently as high as 110%, fall to 10%, within a quota, under the agreement. This contributes to an estimated increase in UK motor vehicle exports, which contains completed motor vehicles and parts, of £890 million – equivalent to a 310% growth in the long run.

UK imports from India in the textiles, apparel and leather sector, are expected to rise by approximately £2.9 billion, equivalent to an 85% relative to a baseline of no FTA. This growth in imports is driven by clothing, textiles and footwear, whose imports are estimated to increase by £475 million (45%), £175 million (40%) and £55 million (30%), respectively.^{[footnote 17]} This increase in imports is driven by the large reductions in UK tariffs and non-tariff measures (NTM) – exposing consumers to India’s comparative advantage in this industry. Though a significant share of this increase reflects trade displacement from other countries, it also reflects an increase in competition from India. Ìý

The modelling indicates that the majority (16 out of 23) of UK sectors analysed may experience higher gross value added (GVA), a measure of national economic output, in the long run, due to the FTA.^{[footnote 18]} The strongest gains are concentrated in the ‘other services’ sector, which includes transport, water and housing services, where GVA could grow by £551 million (0.2%) relative to a baseline of no FTA. This is followed by the manufacturing of machinery and equipment, and the wholesale and retail trade sectors, where GVA is estimated to grow by £527 million (1.65%) and £405 million (0.12%), respectively, relative to a baseline of no FTA.

A minority of UK sectors are expected to generate less output than they would in the absence of a trade agreement. Reflecting the rise in imports, the textiles, apparel, and leather sector is projected to see the largest decline, with GVA estimated to be £114 million (0.7%) lower than in a scenario without the FTA. This in turn is projected to lead to resources shifting away from adversely affected sectors to other sectors that exhibit a larger increase in exports. Other sectors that are expected to see lower output in the long run relative to a scenario of no FTA include the manufacture of other transport equipment and manufacturing not elsewhere classified (n.e.c), which includes pumps and turbines. These sectors could see output fall by around £85 million (0.4%) and £33 million (0.1%), respectively relative to without an FTA.^{[footnote 19]} However, all these sectors would still be expected to grow over this period, and the FTA is not estimated to result in a significant change in the sectoral mix of the UK.

Impacts on UK nations and English regions

The distribution of sectors across the UK indicates that all UK nations and English regions could see an increase in real GVA resulting from the UK-India trade agreement.

The West Midlands and North East could experience the largest relative increases in output, due to the high concentration of the manufacture of motor vehicles and machinery and equipment sectors (which includes pumps and engines) in these regions. The West Midlands is estimated to expand by 0.13% relative to a baseline of no FTA (equivalent to £190 million), while the North East could expand by 0.12% (equivalent to £70 million).

GVA in Scotland, Wales and Northern Ireland is also estimated to increase because of the agreement. Scotland, Wales and Northern Ireland are estimated to see an increase in GVA of around £190 million, £80 million and £50 million, respectively, relative to a baseline with no FTA. These increases are equivalent to 0.12% growth in GVA in Scotland and 0.11% for both Wales and Northern Ireland.

Third country impacts

The UK-India FTA could have wider effects on the economic and social development of third countries as well as environmental impacts. The GDP of most developing countries is estimated to be largely unaffected because of the FTA, except for Nepal and Sri Lanka. There is expected to be a small negative impact on their economies of less than £0.1 billion (relative to the baseline of no FTA in 2040) because of higher import prices from India, as highlighted in Section 6. However, this reduction in GDP does not imply that their economies will not grow over the long term. Similarly, mechanisms such as the Developing Countries Trading Scheme (DCTS) can ensure goods from countries such as Nepal remain competitive in the market by ensuring they are subject to lower tariffs.

Environmental impacts

The expansion in the wider economy, and specifically its industrial sector, may lead to an increase in UK greenhouse gas (GHG) emissions relative to a baseline of no agreement. The agreement is expected to lead to UK GHG emissions increasing by around 0.8 million tonnes of carbon dioxide equivalent (MtCO2e) against 2019 emissions of 393.5 MtCO2e (0.21%). GHG emissions in India are expected to increase by 1.4 MtCO2e because of the FTA. The analysis does not account for existing reductions in emissions from the baseline year or any projected reductions in emissions in the future, for instance due to climate policy. This 0.21% increase in UK emissions resulting from the FTA compares with a 4% decrease in GHG emissions between 2023 and 2024.^{[footnote 20]}

Transport emissions (aviation and maritime) resulting from bilaterial trade between the UK and India, which are modelled separately to GHG emissions, are estimated to increase by around 43% to 49% – or 1.3 MtCO2e to 2.5 MtCO2e, respectively, annually in the long run.^{[footnote 21]} However, the estimated impacts on transport emissions do not take into account decarbonisation policies, changes in business practices to reduce emissions, and the impact of a reduction in trade with third countries as a result of the agreement. These could offset some of the estimated impacts.

Modelling approach

This IA draws on multiple forms of quantitative and qualitative analysis to assess the impacts of the FTA, including data analysis and economic modelling. Within this IA, the computable general equilibrium (CGE) model used to assess the overall macroeconomic impact of the agreement, captures both the potential direct and indirect impacts.^{[footnote 22]} It is commonly used globally to estimate the macroeconomic impacts of FTAs, and recommended by the department‘s Trade Modelling Review.^{[footnote 23]} This IA also uses goods partial equilibrium (PE) modelling to make an assessment of the direct impact of the agreement on specific sectors and to examine the impact on more disaggregated sectors. CGE and PE models are both subject to uncertainty, which is discussed in more detail in Section 3 and Annex 5.

The results presented in this IA are expressed in pound sterling (£) values, to contextualise the results in terms relatable to today’s economy. Details of the conversion of modelling results can be found in Annex 2. The assessment also presents results from a series of off-modelling processes, including combining CGE results with official published datasets, such as the Office for National Statistics (ONS) GVA data. More detailed explanations of the off modelling involved in this IA is provided in the Annexes.^{[footnote 24]}

The models used in the analysis are based on theoretical frameworks which present a stylised set of economic relationships, and historical data relating to past trading and production patterns. The modelled impacts of the agreement are driven by tariff reductions, reductions in regulatory restrictions to trade, and income and supply chain effects as the UK economy grows following the agreement. The modelling results do not represent a forecast for UK growth or trade, nor are they able to consider other external factors that may shape the UK and global economies over the time period that is being modelled, including the subsequent (and shifting) trade deals with the United States and European Union. Instead, the modelling approach indicates the potential scale of the impacts of the agreement.

1.4 Next steps

Ongoing monitoring and evaluation (M&E) of the implementation and impacts of the agreement is an important part of ensuring that the predicted impacts materialise. They are an important part of ensuring that the benefits are maximised for businesses, workers, and consumers. M&E activities help to ensure that new trade opportunities are fully realised. They also help to ensure the full range of impacts, intended and unintended, are understood and inform future policy development. DBT will monitor the implementation and conduct an ex-post evaluation for the agreement. This includes a new follow-up evaluation where appropriate (for example, around 10 years after entry into force) to build understanding of the long-term impacts of the agreement. This is outlined in more detail in Section 10.

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