India-UK Free Trade Agreement Signed: Current Affairs Daily GK Update July 23, 2025 | UPSC Competitive Exam News

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The historic Free Trade Agreement (FTA) between India and the United Kingdom has been approved by the Union Cabinet, marking a major milestone in the economic ties between the two leading democracies. This comprehensive trade deal will be formally signed by Prime Minister Narendra Modi during his visit to London on July 24, 2025.

Cabinet Approval and Signing Details

On July 22, 2025, the Union Cabinet granted approval to the India-UK Free Trade Agreement (FTA). The agreement will be officially signed during PM Modi’s visit to London on July 24, accompanied by Commerce Minister Piyush Goyal.

This pact, formally known as the Comprehensive Economic and Trade Agreement (CETA), becomes India’s 16th Free Trade Agreement and the UK’s largest bilateral deal since Brexit.

Key Features of the India-UK FTA

Tariff Elimination and Market Access

The agreement provides extensive trade benefits to both nations:

India will receive duty-free access for 99% of its exports to the UK, especially in:

Textiles and garments

Leather and footwear

Gems and jewelry

Marine products

Auto components

Sporting goods

India will reduce tariffs on 90% of UK imports, with 85% becoming duty-free over the next 10 years:

Scotch whisky and gin: Duties reduced from 150% to 75% immediately, eventually to 40% over 10 years

Luxury cars: Import duties reduced from over 100% to about 10% under a quota-based system

Other sectors: Lower tariffs on chocolates, beauty products, medicines, fish products, biscuits

Mobility of Professionals and Services

Indian professionals such as IT experts, yoga instructors, chefs, musicians, and others will receive facilitated access to the UK job market.

Indian workers posted temporarily in the UK for up to 3 years will be exempted from paying social security, saving about ₹4,000 crore annually.

Services Sector Commitments:

Strong commitments in IT/ITeS

Financial, professional, and educational services

Mutually beneficial licensing and work visa reforms

Government Procurement Access

UK companies will be allowed to participate in India’s government procurement processes, a first for India in a bilateral FTA.

Over 40,000 tenders worth £38 billion annually will now be accessible to eligible British suppliers.

Economic Impact and Trade Projections

Trade Growth Targets

This free trade pact aims to double bilateral trade from $60 billion (2025) to $120 billion by 2030.

Key trade figures:

India’s exports to UK: $14.5 billion (12.6% growth)

UK’s exports to India: $8.6 billion (2.3% growth)

Overall trade 2023-24: $21.34 billion

GDP and Investment Benefits

UK Government estimates this deal will boost their economy by £4.8 billion annually by 2040.

India gains improved access to the UK import market worth over $815 billion, with India’s current share at just 1.8%.

PM Modi’s Four-Day Foreign Visit

UK Visit (July 23–24)

High-level meetings with UK PM Keir Starmer

Discussions on trade, defense, climate cooperation, education

Likely meeting with King Charles III

Interactions with Indian diaspora and business leaders

Maldives Visit (July 25–26)

Chief guest at Maldives’ 60th Independence Day celebrations

Strengthening ties under India’s ‘Neighbourhood First’ and ‘Mahasagar’ (Ocean) Vision

Possible economic and maritime security agreements

Sectors in India That Will Benefit Most

SectorCurrent UK TariffPost-FTA ScenarioMajor Companies
Textiles4–16%Zero dutyWelspun, Arvind, Raymond
Footwear4–16%Zero dutyBata India, Relaxo
Auto PartsVariableQuota-based entryTata Motors, Mahindra
Gems & JewelryUp to 4%Zero dutyVarious exporters
Engineering8–14%Zero dutyBharat Forge

 

Benefits for UK Exporters

Scotch whisky: Expected to increase exports by £1 billion in 5 years, creating 1,200 jobs

British carmakers (Jaguar, Aston Martin) gain price competitiveness

Tariff relief on pharmaceuticals, cosmetics, chocolates, seafood, and machinery

Double Contribution Convention Agreement (DCC)

Alongside the FTA, India and the UK signed a social security agreement — the DCC, allowing employees deputed between the two nations to contribute only to the host country’s social schemes.
Benefits include:

Temporary assignments of up to 3 years exempted from dual contribution

Major cost savings for IT and service companies

Geopolitical and Strategic Significance

UK’s Post-Brexit Strategy

This FTA aligns with the UK’s “Global Britain” strategy, seeking economic diversification post-EU.

India Builds Global Reach

Strengthens India’s post-RCEP withdrawal image as a proactive global trade player

This deal can serve as a template for EU, US trade negotiations

China-Plus-One Strategy

Encourages global firms to diversify manufacturing to India, reducing China dependency

Enhances India’s image as a supply chain alternative

Implementation Roadmap

The agreement comes into effect after ratification by both countries’ legislatures, expected within 12 months.
Phase-wise implementation will begin immediately for certain sectors, with others seeing reductions over the next 10 years.

Bilateral Issues Discussed

India raised concerns about Khalistani extremism in the UK affecting social harmony

Extradition of fugitives like Vijay Mallya and Nirav Modi also discussed with UK authorities

💡 Why This Matters for Your Exam Preparation

This major development is important across multiple themes relevant to UPSC and other competitive exams:

1. International Relations (GS Paper 2)

Strategic bilateral diplomacy

Evolution of India’s global partnerships

Example of "Comprehensive Strategic Partnership"

2. Economy (GS Paper 3)

Free trade policy, tariff liberalization, FTA mechanics

Impact on GDP, trade balance, services sector

3. Essay and Interview Utility

Model for “India’s role in global trade”

Practical example for topics like “Globalization VS Protectionism”

4. Spotlight for Prelims and Current Affairs

India’s 16th FTA

Tariff policy updates on Scotch whisky, luxury automobiles

Role of DCC (social security pact)

5. Optionals & Ethics

Useful for Political Science, IR, Economics optionals

Shows administrative efficiency in policymaking