India-U.K. Free Trade Agreement: A Historic Step Toward Economic Integration

 

 India-U.K. Free Trade Agreement: A Historic Step Toward Economic Integration

— Blog for UPSC Aspirants by Suryavanshi IAS

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🧭 What Happened?

On July 24, 2025, India and the United Kingdom will sign a Free Trade Agreement (FTA) in London. Officially termed the Comprehensive Economic and Trade Agreement (CETA), this deal is a landmark step in India’s global trade diplomacy.

Signed in the presence of:

• PM Narendra Modi

• UK PM Keir Starmer

Ministers involved:

• Piyush Goyal (India)

• Jonathan Reynolds (UK)

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🔍 Key Features of the India-U.K. FTA

📦 Goods Trade

• 99% of Indian exports to the UK to benefit from zero duty access

• Labour-intensive exports boosted:
  → Textiles, leather, toys, gems, jewellery, marine products, auto parts

🥃 Import Duties Reduced

• Whisky & Gin: Import duty reduced from 150% → 75% → 40% over 10 years

• Automotive imports: Tariffs cut from 100%+ → 10% under quota

⚙️ Other Goods with Tariff Cuts

• Medical devices, chocolate, cosmetics, lamb, salmon, aerospace equipment, soft drinks

💼 Services & Mobility

• Easier visa & work conditions for:

  • Business Visitors

  • Contractual Service Suppliers

  • Yoga instructors, chefs, musicians

  • Intra-Corporate Transferees and their dependents

👨‍💼 Social Security Agreement

• Avoids double social security contribution for Indian professionals in the UK.

📈 Trade Target

• Aim: Double bilateral trade to $120 billion by 2030

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🧠 Why It Matters for UPSC?

“India’s FTAs are not just trade documents, but instruments of diplomacy, strategy and economic growth.”

This deal links multiple UPSC topics:

• GS Paper 2: Bilateral Relations, India-UK diplomacy

• GS Paper 3: Economy – Trade Policy, FTAs, Exports, MSMEs

• Essay: Globalisation, economic reforms, inclusive growth

• Prelims: International trade bodies, FTA mechanism

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📚 UPSC Previous Year Questions – Integrated with Analysis

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🟠 Prelims 2020

Q. With reference to the international trade of India, at present, which of the following statements is/are correct?

1. India’s merchandise exports are less than its merchandise imports.

2. India is the second largest exporter of services in the world.

3. India’s exports of services are more than its imports of services.

Answer: ✅ 1 and 3 only

Relevance:
→ India’s trade is service-surplus but goods-deficit, making FTAs like India-UK important to improve goods trade balance.

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🟢 Mains 2022 – GS Paper 2

Q. “In the light of recent changes in India’s foreign policy, examine the significance of India’s bilateral relations with the United Kingdom.”

Model Points:

• India-U.K. ties in the post-Brexit world

• Enhanced trade: From $21 billion now to $120 billion target by 2030

• Indian professionals’ mobility

• Social security agreement = benefits for diaspora

• Strategic partner in Indo-Pacific; supports India's green economy efforts

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🔵 Mains 2014 – GS Paper 3

Q. “Discuss the impact of Free Trade Agreements on India’s trade and economy. Are FTAs beneficial for India?”

Model Answer Brief:

• Benefits:

  • Boost to exports, job creation, and investment

  • Helps MSMEs in leather, textile, gems

  • Reduces trade barriers

• Risks:

  • Import surge in sensitive sectors (whisky, cars)

  • Impact on domestic producers

• Need for safeguards, tariff quotas, monitoring

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🧩 Mains Practice Question (150 words)

Q. “The India-UK Free Trade Agreement reflects a new phase in India’s economic diplomacy.” Analyse its features and challenges.

Points to include:

• Boost to exports and services

• Market access for British luxury goods (concern for domestic firms)

• Strategic partnership with post-Brexit UK

• Skill mobility for Indian professionals

• Approval pending from UK Parliament – implementation delay

• Way forward: balancing national interest with global engagement

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📝 Prelims Practice MCQ

Q. Which of the following is/are features of the India-U.K. FTA?

1. It allows 100% tariff-free access to Indian exports.

2. Whisky import duties will be eliminated immediately.

3. It includes provisions on intellectual property rights and government procurement.

4. It reduces automotive tariffs to zero under quota.

Select the correct answer:
A) 1, 2, and 4
B) 3 only
C) 1 and 3 only
D) 1, 3, and 4

✅ Correct Answer: C) 1 and 3 only
→ Whisky duties reduced gradually, not eliminated immediately; auto tariffs not to zero, but to 10% under quota.

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📌 Final Thoughts from Suryavanshi IAS

“FTA is not just a trade deal. It is a diplomatic handshake, a policy test, and an economic turning point.”

India’s smart negotiation with the UK reflects its strategic autonomy, economic ambition, and global competitiveness. For aspirants, this is not just current affairs, but a case study in smart diplomacy.