India-UK FTA rings in the cheer for exporters of labour-intensive goods

The India-UK Free Trade Agreement (FTA) finalised on Tuesday has brought in cheer for exporters, especially of labour-intensive items such as textiles, gems & jewellery, leather, footwear, pharmaceuticals and agri & processed foods, who hope to gain from tariff elimination in the UK market.

The double contribution convention, which exempts Indian workers temporarily employed in the UK and their employers from paying social security contributions for a period of three years, has addressed a long-standing challenge, according to Indian service providers.

“The India–UK FTA eliminates or significantly reduces tariffs on a wide range of Indian goods, giving our exporters preferential access to one of the world’s most affluent and consumption-driven markets,” pointed out exporters body FIEO.

According to FIEO, key sectors poised to benefit include textiles & apparel, which will have greater competitiveness against countries like Bangladesh and Vietnam; leather & footwear, which will have increased access to high-end UK retail markets; gems & jewellery, with a boost for India’s handcrafted and diamond processing exports; pharmaceuticals, with streamlined regulatory processes that will accelerate generic drug approvals; agriculture & processed foods, with better access for value-added products, including tea, spices, rice, and ready-to-eat segments.

Textile bonanza

The FTA will result in real gains for Indian sectors like textiles, footwear, carpets, cars, and marine products—all currently facing UK tariffs of 4-16 per cent, reinforced Ajay Srivastava from GTRI. 

“The FTA with UK is a bonanza for Indian apparel exporters. It opens the floodgates of apparel exports to UK,” said Sudhir Sekhri, Chairman of Apparel Export Promotion Council (AEPC). Textiles and clothing, at present, face up to 12 per cent tariffs in the UK.

The UK remains a pivotal market for India’s gem and jewellery sector, with exports reaching $941 million and imports at $2.7 billion in 2024, pointed out Kirit Bhansali, Chairman, Gem and Jewellery Export Promotion Council.

“This landmark FTA is poised to significantly accelerate our export growth, with projections indicating a rise to $2.5 billion within the next two years. As a result, total bilateral trade in gems and jewellery is expected to double, reaching $7 billion,” he said.

Tech sector to gain

The FTA’s focus on digitally delivered services, professional services, and financial services aligns perfectly with the aspirations of the Indian technology sector, according to a statement from Nasscom. “It opens up avenues for deeper collaboration in emerging areas such as artificial intelligence, cybersecurity, and digital transformation, while also creating a conducive environment for startups and innovators,” it said.

By eliminating this double contribution burden, the agreement directly addresses a long-standing challenge faced by IT companies and other service providers operating in the UK, it said. “We will be studying the details of the agreement, including easing mobility for professionals that will enhance business competitiveness, resulting in a win-win partnership,” it added.

Published on May 6, 2025