India-UK Free Trade Agreement: A SWOC Analysis
On July 22, 2025, India and the United Kingdom (UK) marked a significant milestone in their bilateral relations by announcing the successful conclusion of a mutually beneficial Free Trade Agreement (FTA). The agreement was jointly unveiled by Hon’ble Prime Minister of India, Shri Narendra Modi, and UK Prime Minister Sir Keir Starmer. The India-UK FTA, after several rounds of negotiations, is expected to have profound implications on trade, employment, investment, and the geopolitical positioning of both nations.
The following SWOC (Strengths, Weaknesses, Opportunities, and Challenges) analysis highlights the key dimensions of the deal and its potential impacts.
Strengths
1. Comprehensive Market Access
One of the core strengths of the India-UK FTA is the comprehensive market access it provides. According to official data, the UK will eliminate tariffs on 99% of tariff lines, covering nearly 100% of trade value. This move allows Indian exporters across sectors to gain substantial access to the UK market, including traditionally protected areas such as agriculture, textiles, leather, engineering goods, and auto components.
2. Boost to Services Sector
India has long maintained a comparative advantage in services. The FTA’s emphasis on Information Technology (IT), Information Technology Enabled Services (ITES), finance, and education will encourage exports of Indian expertise and generate higher employment opportunities. Eased mobility norms for Indian professionals and mutual recognition of professional qualifications further strengthens this sector.
3. Agricultural Export Gains
UK’s “Zero Duty” regime on over 95% of agricultural tariff lines is expected to cause a 20% surge in Indian agri-exports over the next three years. This benefits Indian farmers and agribusinesses by opening access to a premium market and fostering product diversification.
4. Social Security Relief
A key highlight of the agreement is the exemption of social security contributions for Indian professionals temporarily working in the UK for up to three years. This under the Double Contribution Convention (DCC), significantly enhances the competitiveness of Indian service providers by reducing operational costs and increasing their take-home income.
Weaknesses
1. Historical Underutilization of FTAs
India has struggled with low FTA utilization rates. As per a joint report by the Asian Development Bank (ADB) and Deloitte, Indian exporters and importers lag behind developed countries, which average over 65% FTA usage. Without targeted awareness and simplification measures, this FTA risks remaining underutilized.
2. Trade Imbalances
India’s past FTAs have led to a widening trade deficit. A notable example is the ASEAN-India FTA signed in 2010, post which India’s trade deficit with ASEAN countries expanded considerably. Similar outcomes from the India-UK FTA remain a possibility if imports outpace exports.
3. Limited Focus on Non-Tariff Barriers
Although tariff reductions are central, non-tariff barriers (NTBs) such as complex certification requirements and quality standards can continue to hinder Indian exports. Technical Barriers to Trade (TBTs) were significant challenges in past FTAs and need to be addressed through regulatory harmonization.
Opportunities
1. Increased Bilateral Trade
The India-UK bilateral trade stood at around USD 20 billion in FY 2023-24. With the new FTA, it is anticipated to grow at a compounded rate, potentially reaching USD 30 billion by FY 2026-27. The agreement covers goods, services, investment facilitation, digital trade, and intellectual property.
2. Geopolitical Leverage
The successful signing of the India-UK FTA signals India’s proactive trade posture. It sends a positive message to international markets and builds momentum for other pending trade deals such as India-European Union (EU) and India-US FTAs. The recently concluded second round of talks with New Zealand on a similar FTA reflects this strategic momentum.
3. Resilient Supply Chains
India’s recent experience with supply chain shocks, especially related to Chinese restrictions on rare earth minerals, has underscored the importance of reliable trade partnerships. The India-UK deal could serve as a platform for forging dependable and diversified supply chains for critical goods and technologies.
4. Boost to MSMEs
Micro, Small, and Medium Enterprises (MSMEs) stand to benefit from increased export opportunities, easier standards compliance via harmonized rules of origin, and technology transfer. Government-backed initiatives like the Production Linked Incentive (PLI) scheme could further amplify this benefit.
Challenges
1. Implementation and Monitoring
Translating agreements into action is a recurring challenge. Both governments need to put in place institutional mechanisms for review, dispute resolution, and capacity building to ensure the benefits are realized equitably across sectors.
2. Competition from UK Imports
While tariff elimination benefits Indian exporters, it also allows greater market access for UK goods into India. This could lead to competition for domestic industries, particularly in sectors like dairy, spirits, and processed food, where the UK holds comparative advantages.
3. Political Sensitivities
Trade agreements often face political resistance domestically, particularly from constituencies fearing job losses or domination by foreign firms. Any perception of unequal gains could lead to public opposition, impacting long-term stability of the agreement.
4. Brexit-Related Uncertainties
Although the UK is actively seeking trade partners post-Brexit, there remain concerns around regulatory volatility, immigration policies, and market preferences which could impact the sustained effectiveness of the FTA.
Conclusion
The India-UK FTA is a significant and strategic economic achievement that sets the stage for broader engagement between the two nations. Its impact transcends trade—it has diplomatic, employment, investment, and global image implications. While historical shortcomings of India’s FTAs do serve as cautionary tales, this agreement is structured more comprehensively with stronger provisions in both goods and services.
Moving forward, it is crucial that stakeholders—including policymakers, industry associations, and exporters—work collectively to maximize the benefits and minimize the risks associated with the FTA. Effective monitoring, education on FTA benefits, infrastructure support, and cross-border cooperation will be the keys to its success.
As India aspires to become a USD 5 trillion economy, FTAs like the one with the UK will form a critical part of the roadmap. Strategic international partnerships will not only facilitate economic expansion but also position India as a resilient, reliable, and responsible global trade player.
Abbreviations
| Abbreviation | Full Form |
| ADB | Asian Development Bank |
| ASEAN | Association of Southeast Asian Nations |
| DCC | Double Contribution Convention |
| EU | European Union |
| FTA | Free Trade Agreement |
| IT | Information Technology |
| ITES | Information Technology Enabled Services |
| MSME | Micro, Small, and Medium Enterprises |
| PLI | Production Linked Incentive |
| TBT | Technical Barriers to Trade |
| UK | United Kingdom |
