Spices and Scotch – New Silk Route Between India and the UK
Introduction
From the bustling cotton mills of Manchester to the spice-laden markets of Kerala, the economic entanglements between India and the United Kingdom stretch back centuries, woven through colonial ambition, industrial revolution, resistance, and eventual independence. Today, those historical currents are being redirected into a new, cooperative tide. As the two nations inch closer to finalising a long-anticipated Free Trade Agreement, the world is watching a relationship once marked by imposition now pivot toward partnership. This isn’t just another trade deal buried in diplomatic jargon, it’s a historic recalibration. One that reflects how global power dynamics have shifted, how emerging markets like India are no longer passive participants, but active shapers of international economic policy.
The proposed agreement, several years and fourteen negotiating rounds in the making, comes at a time when both countries are redefining their global roles. For post-Brexit Britain, striking meaningful trade partnerships beyond Europe is no longer optional; it’s existential. For India, now the world’s fifth-largest economy, the deal represents an opportunity to secure preferential market access, boost its exports, and cement its identity as a manufacturing and services powerhouse. But beyond economics, the FTA is also symbolic: a gesture that two democracies with shared values, people-to-people ties, and a complex shared history can move forward with mutual respect and strategic purpose. In a time marked by rising protectionism, fractured supply chains, and shifting alliances, this moment stands out. It signals that despite political churn, bureaucratic hurdles, and global headwinds, two nations with very different pasts are choosing a shared future, one built on commerce, collaboration, and a recalibrated vision of globalisation. As the ink dries and the final clauses are hammered out, the India–UK FTA could very well become a blueprint for how modern trade diplomacy is done, with pragmatism, patience, and purpose.
Delays and Deadlocks
The India–UK Free Trade Agreement has been one of the most anticipated international economic deals of the post-pandemic world, but also one of the most drawn-out. First formally launched in January 2022, the FTA aimed to deepen trade ties between two countries that share a long, complex historical relationship and a growing convergence of interests in the 21st century. On paper, the deal made perfect sense. The UK, having exited the European Union, was urgently seeking new bilateral trade deals to redefine its global economic identity. India, meanwhile, was seeking to boost its exports and secure market access to high-income countries as part of its broader trade and investment strategy. Yet, despite strong political will, the path to agreement was anything but smooth.
One of the most persistent hurdles came from Britain’s revolving door of leadership. Since talks began, the UK has seen three different prime ministers, Boris Johnson, Liz Truss, and Rishi Sunak, each bringing different priorities and negotiation styles. This disrupted continuity in negotiations and delayed decisions at the highest levels. Johnson, for example, had pushed for an ambitious Diwali 2022 deadline, but that proved to be overly optimistic. Both countries held firm on issues central to their domestic interests, leading to impasses: India demanded greater mobility for its skilled professionals and relaxed visa norms, especially in sectors like IT, finance, and hospitality. The UK wanted steep tariff reductions on goods such as Scotch whisky, cars, and legal services, where India traditionally maintains high import duties.
Besides, India was cautious about opening its agricultural and dairy sectors to British imports, concerned about the impact on millions of small farmers. Any major concession in this space could trigger a domestic political backlash, especially with elections looming. The UK pushed for stronger intellectual property rights, including extended patent protections and data exclusivity in pharmaceuticals. India, home to a large generics industry, was reluctant to make commitments that could raise drug prices or restrict access to affordable medicine, both for its population and for the developing countries it supplies. Another sticking point was the UK’s proposal to include environmental and labour standards, particularly relating to a potential carbon border adjustment tax. India, still industrialising and heavily reliant on coal in some sectors, viewed such provisions as potential non-tariff barriers that could undermine its competitiveness.
These delays have come at an economic cost. Trade between the two nations, around £36 billion annually, has considerable untapped potential. Each year without a deal meant missed opportunities for exporters, especially small and medium enterprises that rely on preferential access. It also prolonged uncertainty for investors on both sides. Moreover, the prolonged negotiations slowed down momentum for other Indian FTAs (such as with the EU or Canada) and added strain on diplomatic bandwidth. At a time when both countries faced inflationary pressures, slowing growth, and supply chain vulnerabilities, the lack of an agreement felt increasingly like a strategic gap.
What the Deal Delivers?
After years of back-and-forth negotiations, the India–UK Free Trade Agreement is finally nearing the finish line, and several critical features of the deal have now come to light. While not every demand has been met on either side, the agreement reflects significant compromises and strategic wins for both countries. One of the headline components of the agreement is the mutual reduction and elimination of tariffs across a wide range of goods. For the UK, India will reduce its steep tariffs on British exports, such as Scotch whisky, which currently face a 150% import duty. Under the deal, this is expected to be cut by up to 75% initially and gradually lowered to 40% over ten years. Tariff reductions will also apply to premium British cars and a variety of other manufactured goods. For India, nearly 99% of Indian exports to the UK will receive duty-free or reduced-tariff access. This includes key sectors like textiles, apparel, jewellery, rice, and processed food products, giving Indian businesses a significant competitive edge in the UK market.
Services trade is a central area of interest for India, and the agreement includes provisions that improve access for Indian service providers in sectors like IT, healthcare, education, and financial services. The deal also contains clauses on mutual recognition of professional qualifications, which will make it easier for Indian professionals in law, accounting, architecture, and related fields to work in the UK. Although India did not secure a major liberalisation of visa regimes, there are modest improvements in mobility for certain categories like chefs, musicians, and other skilled professionals. The deal also streamlines intra-corporate transfers and short-term business travel. The FTA is backed by a Bilateral Investment Treaty (BIT) that seeks to protect investors from both countries through transparent and stable rules. It includes mechanisms for dispute resolution and aims to encourage greater foreign direct investment by offering legal clarity and regulatory safeguards. Both sides have also agreed to promote ease of doing business, with commitments to reduce bureaucratic hurdles, enhance digital trade frameworks, and support e-commerce development.
The FTA also facilitates closer cooperation in high-value sectors. The UK is eyeing deeper industrial collaboration in defence manufacturing, especially under India’s Make in India initiative. The two countries have committed to expanding trade in green technologies, including electric vehicles, solar panels, and green hydrogen, supporting both climate goals and industrial growth. One of the more contentious areas, intellectual property rights, has seen a nuanced resolution. The UK had pushed for extended patent terms and tighter data protection for pharmaceuticals. However, India successfully defended its interests in retaining regulatory space to ensure access to affordable generic medicines. The final language is believed to reflect a balanced approach, acknowledging the UK’s concerns while preserving India’s role as a major supplier of affordable medicines to the developing world. Beyond the economics, this deal has symbolic and strategic weight. It positions the UK as a committed partner in the Indo-Pacific, aligning with its post-Brexit Global Britain strategy. For India, it’s a signal that it can strike meaningful trade deals on its terms, without compromising core domestic interests. This will strengthen its hand in upcoming negotiations with the EU, EFTA, and other blocs.
Who benefits from the deal?
On the Indian side, the textile and apparel industry is poised for a major uplift. With the UK set to reduce or eliminate tariffs that previously ranged between 8 to 12 per cent, Indian manufacturers will gain a stronger foothold in a competitive market. This is especially significant for India’s labour-intensive garment sector, which employs millions and operates on relatively thin margins. Companies such as Raymond, Arvind Ltd., Welspun, and Aditya Birla Fashion are well-positioned to take advantage of the smoother access to British retailers and consumers. Another big winner is the gems and jewellery industry. The UK has long been one of the top destinations for Indian handcrafted jewellery and cut diamonds. With tariff barriers lowered and customs procedures expected to be streamlined under the deal, Indian jewellery exporters can expect stronger demand and better pricing power. Major players like Titan (through its Tanishq brand) and Kalyan Jewellers, along with clusters of small and medium enterprises in states like Gujarat and Rajasthan, stand to benefit.
The pharmaceutical sector also secures a strategic advantage. While India successfully resisted stricter UK demands on patents and data exclusivity, the FTA still facilitates smoother regulatory pathways and greater acceptance of Indian generic medicines in the UK market. This is crucial for companies like Sun Pharma, Dr. Reddy’s, and Cipla, which have already established a global presence. Improved access to the NHS procurement system could mean more contracts and volume for these firms. India’s IT and services sector gains from improved provisions for the temporary movement of professionals and mutual recognition of qualifications. Although the FTA stops short of granting broad-based visa liberalisation, the commitments made, especially for short-term business travel and intra-company transfers, will ease operational hurdles. This supports major IT exporters like Infosys, TCS, Wipro, and Tech Mahindra, many of which already operate large delivery centres and client offices across the UK.
On the British side, several industries see clear gains. The whisky and spirits sector, led by iconic brands like Diageo (which owns Johnnie Walker, Talisker, and others), will benefit from India gradually lowering its steep 150% import duties. This could open up what is potentially the largest whisky market in the world by volume. Luxury carmakers such as Jaguar Land Rover (owned by India’s Tata Motors), Aston Martin, and Bentley also gain from reduced tariffs on high-end vehicles, helping to make British-made cars more affordable to Indian consumers. The UK’s legal, accounting, and financial services sector stands to benefit too, particularly through clauses that improve access for foreign service providers and create a more predictable regulatory environment. London-based multinational firms in law, finance, and consulting could find it easier to expand their presence in India’s growing market for professional services.
Who gets hurt by this deal?
While the India–UK FTA offers substantial opportunities, not every sector or group within India stands to benefit equally. Some industries could face increased competition, and others might see only limited gains. Here’s a detailed analysis of who may not benefit, or might even be hurt, by the deal on the Indian side. Several segments of India’s agriculture and dairy sector are among the most vulnerable. Although negotiators were careful to protect these industries from deep tariff cuts, even limited market opening can spark anxiety. The UK has a competitive and heavily subsidised dairy industry, and Indian farmers fear that any increased access could undercut domestic prices. Cooperatives and small-scale producers, especially in states like Punjab and Maharashtra, have voiced concerns over being exposed to imports of cheese, butter, and milk powder. While current safeguards remain in place, the long-term fear is that this deal sets a precedent for future liberalisation that could hurt rural livelihoods.
Small-scale manufacturers and MSMEs in low-margin sectors may also face indirect challenges. If the deal eases UK access to Indian markets for machinery, electronics, or high-quality consumer goods, domestic producers might find themselves outcompeted, especially in urban markets. India’s micro and small enterprises often struggle with scale, branding, and quality consistency—areas where UK exporters typically excel. Without adequate government support in adapting to the new trade landscape, these businesses could be squeezed out of the value chain. There are also limited immediate benefits for low-skilled labour and informal sector workers. While service liberalisation will support highly skilled IT professionals and corporate talent, it offers little for the majority of India’s workforce, which remains concentrated in informal jobs and lower-wage sectors. This could widen the existing disparity between India’s tech-savvy urban workforce and the broader labour base that lacks similar mobility or opportunities.
In addition, environmental and sustainability clauses in the FTA could place compliance burdens on Indian exporters, especially smaller ones. If the UK insists on enforcing stricter carbon standards or ESG-related conditions over time, many Indian firms—particularly in textiles, leather, and manufacturing—may struggle to afford the cost of compliance, audits, and certification. This could potentially restrict their market access unless sufficient adaptation support is provided. Finally, pharmaceutical companies are operating at the ultra-low-cost end of the market, which may see thinner margins if the agreement nudges India closer to aligning with stricter IP norms or regulatory standards. While India has avoided making deep concessions on patents for now, any future commitments or side deals that tighten rules could affect the generics segment that thrives on flexible regulation and low-cost production.
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