India-UK FTA: A Deep Dive into the Financial Implications

NEW DELHI: The newly signed Free Trade Agreement (FTA) between India and the United Kingdom is set to impact India's customs revenue significantly. According to the Global Trade Research Initiative (GTRI), India could face a revenue loss of approximately Rs 4,060 crore in the first year alone, due to reduced or eliminated tariffs on British imports.

This estimation is based on current import volumes and the existing tariff structures. The agreement, signed recently, includes phased tariff eliminations that are expected to increase India's annual revenue loss to Rs 6,345 crore by the tenth year of its implementation.

Impact on Trade and Tariffs

India imported goods worth $8.6 billion from the UK in the fiscal year 2024-25, with a significant portion being industrial products that currently attract an average customs duty of 9.2%. The GTRI highlights that India has agreed to eliminate tariffs on 64% of the value of imports from the UK immediately upon the agreement's implementation.

Overall, India will remove tariffs on 85% of tariff lines and reduce duties on an additional 5% of product categories. Notably, most agricultural products have been excluded from these cuts, except for items like whisky and gin, which face higher average tariffs of 64.3%.

UK's Perspective and Future Implications

On the other side, the UK imported $14.5 billion worth of Indian goods last fiscal year. The GTRI estimates an annual revenue loss of British Pound 375 million for the UK, based on FY2025 trade data. As Indian exports to the UK grow, the fiscal impact on the UK is also expected to increase over time.

The Comprehensive Economic and Trade Agreement (CETA) commits the UK to removing tariffs on 99% of Indian imports. However, the agreement still requires parliamentary approval in the UK, with full implementation potentially taking up to a year.