India’s recently signed free trade agreement (FTA) with the United Kingdom could boost the country’s economic growth by up to 25 basis points over the next five years, a Bloomberg report quoted Elara Capital. Economist Garima Kapoor told Bloomberg TV that the pact could deliver an immediate 10-15 basis point jump in GDP growth over the next two years.
The landmark agreement between the two countries aims to reduce tariffs on a range of goods including textiles, whisky and cars, while improving market access for businesses on both sides. Two-way trade between India and the UK stood at $21.9 billion in 2024. The trade deal was finalised on Thursday after three years of negotiation.
Deal could serve as blueprint
Kapoor stated that India’s key advantage will lie in labor-intensive exports such as textiles and footwear, giving it an edge over regional competitors like Bangladesh and Vietnam. “The benefits will be staggered, but significant over time,” she told Bloomberg.
The economist also noted that the deal could serve as a blueprint for future trade negotiations, including a potential agreement with the United States. While the FTA opens up India’s automobile sector, areas like agriculture and dairy remain protected under the current framework.
‘UK rolls out the red carpet for Made in India’
Commerce Minister Piyush Goyal and UK Secretary of State for Business and Trade Jonathan Reynolds formally signed the free trade agreement in the presence of Prime Minister Narendra Modi and his UK counterpart Keir Starmer.
The India-UK FTA marks a major milestone in India’s trade relations with developed nations. “UK rolls out the red carpet for ‘Made in India’,” Goyal said in a post on X. The agreement is projected to enhance bilateral trade by an estimated $34 billion each year.