UK-India trade deal finalised

UK and India signed a free trade agreement (FTA) on 24 July, marking the first deal of this kind signed by the current Labour government. The deal aims to boost trade between the UK and India by cutting tariffs on 90% of tariff lines and reducing barriers to entry and therefore boosting market access, while committing to maintaining food standards for imports.

Long-term export opportunities

The Government expect that this trade deal will increase UK GDP by £4.8 billion, with bilateral trade expected to increase by £25.5 billion each year in the long term.

India has the highest growth rate in the G20 and has recently risen to the fifth largest economy in the world.

Additionally, forecasts suggest both population and economic growth which will increase the amount of India’s middle-class consumers with more disposable income.

This means that by 2030, India is expected to grow to be the third-largest economy in the world (World Economic Outlook, IMF).

The growth presents opportunity for UK businesses, as consumers will look to purchase high quality goods.

However, there has been limited export opportunities for the UK as India has been a highly restrictive market due to high tariffs and barriers to trade.

This deal looks to start reducing these restrictions from the moment the deal comes into force.

For agri-food exports, the deal sees substantial reductions on tariffs on a range of exports into India including whisky, gin, biscuits, salmon, chocolate and lamb.

Tariffs on UK gin and whiskies into India will be reduced from 150% to 75% on day one, then staged to 40% from year 10 onwards. For lamb, from 33% to zero on day one.

In previous analysis we noted that there is potential for UK lamb exports to grow in the longer term as the middle-class population expands.

Beef is excluded from this trade deal as India maintains a strict control on beef imports due to religious and cultural reasons. Pork and dairy products have also been excluded from any tariff concessions of UK exports into India.

It is important to note, the deal excludes some UK agri-food products from trade liberalisation and protects sugar, milled rice, pork, chicken, and eggs from any reduction of tariffs for India exports to the UK.

Dairy remains key watchpoint for the deal

There are concerns from the dairy industry as dairy trade into the UK has been liberalised, however no greater access has been negotiated for UK access into India.

Dairy tariffs into India remain quite high, exceeding 30% depending on the product, which is limiting UK’s competitiveness in dairy products.

India is one of the world’s largest dairy producers, but the industry has a strong domestic focus. In 2024, only 103,000 tonnes of dairy products were exported, mainly to the Middle East and other neighbouring Asian countries. Table 1 shows the key dairy products that India exports.

Table 1. Indian exports of dairy products (three-year average)

Source: TDM

There are currently limitations to India’s export potential and competitiveness on the global market for dairy products:

• Low milk yields
• High production costs
• Poor quality milk
• Unreliable cold chain, and disease risk from lack of facilities
• High domestic demand

However, with growing consumer demand, cooperatives and private dairies are now investing in collection, processing and sales channels which may increase export potential in the future.

Currently, India does not have an export health certificate to export dairy products to the UK. Short term, there is unlikely to be a surge of dairy products from India to the UK.

However, there is more of a medium to long term risk with reducing dairy import tariffs into the UK and potential for industry to growth very quickly with modernisation, improved yields and increased formal collection of milk.

New investment and more private businesses mean the sector will continue to grow and seek export opportunities.

Other commitments

The deal has upheld the UK’s high food standards, maintained animal welfare commitments and included chapters on anti-corruptions, environment, labour rights, gender and development.

The deal reaffirms the mutual commitments to global environmental agreements including the Paris Agreement and a transition to clean energy and supports net-zero ambitions.

The deal also includes provisions on issues such as tackling air pollution, defending the marine environment, reducing deforestation, protecting biodiversity and reducing waste.

This will support the UK’s climate and environmental goals, and support cooperation and trade which remaining committed to environmental goals.

What are the impacts?

We are unlikely to see any dramatic changes in the short-term and will not be a ‘game changer’ for the UK red meat and dairy sector.

The expansion of the middle class, population growth and economic development are likely to be the drivers for longer-term benefits for UK lamb exports, driven by potential for increased demand for products.

Any threats from imports into the UK appear to be very limited based on current production and consumption trends.

Though in the long term, there may be risks to dairy products due to full liberalisation, however India is not currently competitive on the global market, and the products they export are to other markets.

The next steps are to ratify the deal and for the deal to be scrutinised and passed by parliament. The FTA will enter into force once both the UK and India have completed their ratification processes.

Further information