UK FTA offers hope for long-term growth

India and the United Kingdom officially signed a Free Trade Agreement (FTA) on 25 July, during Prime Minister Narendra Modi's visit to the UK. The deal is expected to increase bilateral trade by $34 billion annually, making it the most significant trade pact for the UK since leaving the European Union and the most comprehensive one India has signed.

- PIYALI MAJUMDER AND SANJIB POHIT

Incidentally, this agreement was sealed in record time in contrast to the India-EU trade deal, whose negotiation is yet to be completed.

Historically, the partnership between India and the UK has passed through multiple phases - from mere spice and cotton traders, to colonial legacies, and finally sealed as free trade partners on 6 May 2025. No doubt, the legacies played a critical role in shaping the bilateral dynamism between these two countries. Latest trade data shows, total trade (merchandise and services, including both export and import) between India and the UK amounts to £42.6 billion.

Some of the major commodities imported by India from the UK during the Q4 2024 are non-ferrous metals, metal ores, and general machinery. Clothing, pharmaceuticals, iron and steel, telecom, and sound equipment are some major products that constituted the import basket of the UK from India during Q4 2024. Mode 2 (i.e., service consumption abroad) service export from the UK to India constitutes the bulk, and Mode 1 (i.e., cross-border supply of services) constitutes the bulk of the UK's import of services from India.

With regard to long-term capital flow, Foreign direct investment (UK to India) has grown by 13 per cent in 2023 (compared to the 2022 value). By contrast, FDI flows from India to the UK registered a growth of 28.5 per cent in 2023 (compared to the 2022 value). This momentum will gain further traction after the completion of the bilateral investment treaty agreement (BIT) between the two countries.