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In a world increasingly marked by protectionism and economic insularity, India’s recently concluded Free Trade Agreement with the United Kingdom is both unusual and revealing. Signed on May 6, the pact signals not just a warming of bilateral relations, but also a broader recalibration of India’s trade strategy—one that now leans more decisively towards integration with the global economy.
For India, historically wary of liberalising its trade regime too hastily, this agreement is a notable departure. The terms are ambitious: tariffs on 99% of Indian exports to the UK will be eliminated, while those on 90% of British exports to India will be progressively reduced. The UK, for its part, gains access to a vast and fast-growing consumer market. India, meanwhile, secures favourable terms for key sectors, including textiles, pharmaceuticals, and IT services—industries that have long been India’s export mainstays.
Strategic trade, not sentimental ties
But the true significance of this agreement lies less in its commercial particulars than in its geopolitical timing and strategic intent. India is hedging against global trade fragmentation, seeking new routes to economic resilience as China’s slowdown casts a long shadow and America’s trade posture grows more insular. Britain, isolated after Brexit, is similarly looking to redefine its global economic footprint. That the two should find common cause is less surprising than the speed and comprehensiveness with which they have done so.
The pact’s architecture is clearly tilted to favour India’s export ambitions. Duty-free access for textiles and garments gives a much-needed boost to labour-intensive industries struggling with global demand volatility. Similarly, faster regulatory approvals for pharmaceutical exports underscore India’s growing clout as the “pharmacy of the world.” In services, a simplified visa regime and mutual recognition of qualifications offer a pathway for Indian professionals, especially in IT, to find more seamless entry into the UK job market.
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A deal that speeds up Tata’s wheels
Yet the benefits are not one-sided. One of Britain’s top priorities was tariff relief for its car exports to India, especially those from Jaguar Land Rover (JLR), the luxury auto brand owned by India’s Tata Motors. For years, JLR has found itself awkwardly caught in a tangle of import duties imposed by the Indian government—duties that hampered access to a market that is, paradoxically, both its parent company’s home base and one of the most promising luxury car markets in the world.
The FTA now offers it a timely advantage. While existing models like the Range Rover and Velar—assembled locally from CKD kits—remain outside the FTA’s scope, future fully built units imported from the UK will see import duties slashed from 100% to 10%. This drastic reduction will bring Indian buyers closer to global price levels and shorten delivery times significantly. Owned by Tata Motors since 2008, JLR recorded a record 6,183 vehicle sales in India last year. The new trade terms could accelerate the company’s growth in a market poised for expansion, strengthening its long-term prospects in India.
This is not merely a treaty between two governments, but a recognition of the deeply intertwined nature of their corporate ecosystems. Tata Group is one of Britain’s largest private sector employers, with interests ranging from steel to tea to software.
A blueprint for future engagement
Even so, as with all FTAs, gains are not automatic. Tariff reductions are only useful if accompanied by logistical efficiency, regulatory clarity, and minimal non-tariff barriers. Moreover, India’s decision to exclude certain politically sensitive sectors—dairy, apples, and others—from concessions is a reminder of the fraught balance between domestic protection and outward ambition. The exclusion may have been necessary, but it also curtails the agreement’s liberalising spirit.
The larger story, however, is one of strategic realignment. India’s past flirtations with FTAs—such as those with ASEAN and South Korea—have delivered mixed results, leading to a period of scepticism about their utility. This deal, by contrast, appears more calculated and calibrated. It avoids the lopsidedness that has marred earlier treaties and reflects the growing sophistication of Indian trade negotiators. The government’s pivot from defensive trade postures to assertive deal-making reflects confidence in India’s economic trajectory and its desire to project influence not just through GDP figures but through global rule-making.
The pact also opens the door to other stalled negotiations. Talks with the European Union and Canada, once bogged down by regulatory friction and ideological hesitations, may now regain momentum. India, previously reluctant to engage in reciprocal market access talks, seems to be warming to the idea that trade liberalisation, done selectively and strategically, can serve domestic development goals rather than undermine them.
What emerges, then, is a more agile, globally engaged India—one that is neither retreating behind tariff walls nor throwing open its markets indiscriminately. In choosing to deal with Britain on terms that advance its national interests while deepening global ties, India is making a statement. Amid rising economic nationalism, it is not merely reacting to the rules of trade. It is beginning to shape them.
The UK deal may not transform trade flows overnight. But it is proof that India, when it chooses, can engage constructively—and on its own terms. That should be a wake-up call in Washington.
Please share your feedback, suggestions if any. You can reach me on amol.dethe@timesinternet.in and follow me on LinkedIn here.
(Editor’s note is a column written by Amol Dethe, Editor, ETCFO. Click here to read more of his articles exploring several buzzing topics)
- Published On May 16, 2025 at 08:55 AM IST
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