India and the United Kingdom are reportedly close to signing the long-awaited Free Trade Agreement (FTA), a development that could significantly boost India's exports and bring down the cost of several imported goods. Sources suggest that the agreement could be signed during Prime Minister Narendra Modi’s upcoming visit to the UK scheduled for July 23–24. This marks a pivotal moment in India-UK economic relations, with substantial implications for trade and industry.
The FTA has been in the pipeline for years and is now at a critical juncture. With negotiations nearing completion, there is high probability that the deal will be inked during Modi’s UK trip, aligning it with the broader bilateral engagement agenda.
One of the biggest highlights of this FTA is the expected boost to Indian exports. Nearly 99 percent of India’s exports to the UK could receive duty-free access once the deal is implemented. This is projected to dramatically increase India’s export volume over the next decade. Estimates suggest that within five years of the agreement's implementation, India’s exports to the UK could rise to approximately ₹5.16 lakh crore. Over the next ten years, this figure might further climb to between ₹6.8 lakh crore and ₹7.25 lakh crore.
Several sectors are poised to benefit from this agreement. Key among them are leather, textiles, footwear, tyres, and gems and jewellery. These industries already have strong export linkages with the UK and could see significant gains due to reduced tariffs and better market access.
On the import side, several products currently subject to high duties in India are expected to become cheaper. These include Scotch whisky, gin, medical devices, and luxury cars. For instance, India currently imposes a hefty 150 percent import duty on Scotch whisky. Under the FTA, this could be slashed by half to around 75 percent. While the reduced rate still appears high, experts note that if the cost benefits are passed on to consumers, the price of premium Scotch could drop by 8 to 9 percent.
Similarly, the agreement is likely to benefit the automobile sector, particularly in the luxury segment. Lower import duties on cars could enhance competitiveness and consumer choice. Tata Motors, which owns Jaguar Land Rover (JLR), is expected to be one of the major beneficiaries. JLR has manufacturing facilities in the UK, and a more favorable tariff structure could bolster its sales in India.
From an investor’s perspective, certain export-oriented stocks could see a positive impact. The textile sector, in particular, stands out. Market experts have recommended companies like Welspun Living, Gokaldas Exports, Nitin Spinners, and Indo Count Industries as potential short-term gainers from this deal. These companies have significant exposure to international markets, and improved access to the UK can enhance their revenue potential.
Apart from textiles, the footwear and gems & jewellery sectors also hold promise. India already exports a substantial volume of these goods to the UK, and tariff elimination could unlock new growth opportunities.
The liquor sector may also witness significant activity. With reduced duties on imported spirits, global players like Diageo could see increased sales in India. If market demand responds positively, it could lead to more product launches and wider consumer choices.
In conclusion, the India-UK FTA, if signed as expected in the coming week, will mark a significant shift in bilateral trade dynamics. With substantial benefits across exports, reduced duties on key imports, and a clear sectoral impact, the agreement promises to be a game-changer for Indian trade and industry. Businesses and investors alike would do well to keep a close watch on developments and be ready to leverage the emerging opportunities.
Disclaimer:
The information provided in this blog is for general informational purposes only and is based on publicly available sources and current market expectations. It does not constitute financial, investment, or legal advice. Readers are advised to conduct their own research or consult with a qualified professional before making any investment or business decisions. The author and the website shall not be held responsible for any loss or damage arising from reliance on the information provided herein.
