India-UK FTA: A win or a concern for different sectors

The India-UK Free Trade Agreement (FTA), signed in May 2025, is being viewed as a transformative moment in the evolving relationship between the world’s fifth and sixth largest economies. But if you scratch beneath the surface of the headlines, you see a deal that brings both victories and concerns, depending on your position in the economy.

While the FTA promises to double bilateral trade to $120 billion by 2030 and reshape sectoral dynamics, its real impact will be felt in the boardrooms of exporters, the workshops of Micro, Small, and Medium Enterprises (MSMEs), the fields of farmers, and the showrooms of luxury car dealers. Here’s how the deal stacks up for different sectors and what you should watch out for as the dust settles.

What the India-UK FTA actually delivers

The FTA is ambitious in scope, covering goods, services, investments, professional mobility, and even public procurement. Indian exporters will benefit from zero-duty access on 99% of tariff lines, effectively covering most of the country’s trade with the UK. For UK exporters, 90% of their product lines will see reduced tariffs in India, with 85% set to become completely tariff-free within a decade.

Winners: Sectors poised to gain

Textiles and apparel

The FTA is expected to provide a significant boost to India’s textile and apparel sector. With tariffs on Indian exports eliminated, companies in this space are likely to gain a competitive edge in the UK market. This could translate into higher export volumes, improved earnings visibility, and stronger order books, especially for listed textile exporters. The sector is also expected to benefit from increased job creation, which may support long-term capacity expansion and productivity gains.

IT and professional services

The FTA is expected to benefit India’s IT services sector by easing market access and supporting greater professional mobility between the two countries. Indian firms may gain from a simplified regulatory environment and enhanced service export opportunities to the UK. The agreement complements recent initiatives such as the Young Professionals Scheme and includes a social security arrangement that exempts short-term Indian workers from dual contributions for up to three years, potentially reducing cost burdens for companies and employees alike.

Pharmaceuticals

Indian pharma companies will find it easier to secure regulatory approvals for generic drugs in the UK, boosting exports and profitability. This could be a game-changer as the UK seeks affordable medicines post-Brexit.

Gems, jewellery, and leather

With tariffs slashed, Indian gems and jewellery exports to the UK are expected to rise sharply, potentially doubling total bilateral trade in this segment. Leather and footwear manufacturers also stand to gain, given the UK’s strong demand for these products.

MSMEs

India’s 63 million MSMEs, which account for over 40% of total exports, are perhaps the key beneficiaries of this FTA. With easier access to the UK market, MSMEs in textiles, engineering, and food processing can scale up, create jobs, and invest in value addition.

Cautious optimism: Sectors with mixed outcomes

Agriculture and food processing

Indian exports such as tea, spices, and ready-to-eat foods are set to gain from improved access to the UK market under the FTA. However, the agreement deliberately excludes several sensitive domestic sectors from tariff reductions on imports. Products such as dairy, apples, cheese, poultry, eggs, and pig meat are protected to prevent disruption from lower-cost UK imports. While this approach safeguards Indian producers and agri-entrepreneurs, it also limits reciprocal export opportunities in these segments.

Auto and engineering goods

The FTA’s impact on the auto sector is mixed. Indian consumers stand to benefit as tariffs on UK automotive imports, currently over 100%, drop to 10% under a quota system, making luxury brands like Jaguar Land Rover and Bentley more accessible. However, this could increase competitive pressure on domestic automakers, particularly those not aligned with global brands. There’s also concern about the potential backdoor entry of Chinese products via the UK, which could further pressure local manufacturers.

Conversely, Indian automotive component makers can hope to gain better access to the UK market, providing growth prospects to some suppliers. Also, engineering exports of India to the UK are estimated to almost double by 2030.

Concerns and challenges

Sensitive sectors and exclusions

India has tactically shielded a number of industries by keeping diamonds, silver, mobile phones, plastics and some chemicals out of tariff concessions. This guards domestic industries but also means that some exporters will not reap immediate benefits.

Implementation risks

Taking advantage of the FTA’s benefits hinges on smooth implementation. There are worries about overexposure in sensitive sectors, mainly dairy, automotive, and pharmaceuticals if regulatory oversight falters. For MSMEs, non-tariff barriers, quality standards, and compliance costs could erode some of the expected gains.

Job market disruptions

While the FTA is expected to create jobs in labour-intensive sectors, there’s a risk of job losses in industries facing increased competition from UK imports. The auto sector, in particular, could see shifts in employment patterns as global brands expand their footprint in India.

Public procurement and “Make in India”

UK businesses will gain access to India’s public procurement market, mainly in construction and services. While this could bring in investment and expertise, it also raises concerns about crowding out local firms unless “Make in India” preferences are strictly enforced.

What you should watch next as an investor

The FTA is not yet in force; it requires ratification by both countries. In the coming months, you should keep an eye on the following developments, which could materially influence sector outlooks and stock performance:

• The detailed tariff reduction schedules and quota management: Sector-specific timelines will determine when benefits begin to reflect in earnings, particularly for exporters in textiles, auto components, and engineering.

• Rules of origin to prevent circumvention by third countries: This will be critical in assessing whether third-country goods may enter Indian or UK markets via circumvention, impacting domestic manufacturers.

• Regulatory alignment, especially for pharma and food products: Progress on harmonising standards in such industries will shape the pace at which Indian firms can scale in the UK market.

• The pace of professional mobility reforms and visa processing, especially in IT and consulting, may directly affect talent flow, billing rates, and global delivery models.

Conclusion

The FTA’s true test will be its ability to foster not just trade, but also resilience, job creation, and inclusive growth. For investors, the agreement opens potential tailwinds in export-linked sectors such as textiles, engineering, IT services, and pharmaceuticals, though timelines and implementation risks remain key variables. As the FTA moves toward ratification, tracking sector-specific developments will be critical to identifying early beneficiaries and pricing in long-term upside.