(more to come)
UK: This deal gives UK businesses first-mover advantage with a new economic superpower. Currently the biggest country in the world by population, India is projected to move from its fifth-largest global economy to third in the next three years, thanks to the highest growth rate in the G20. footnote 2 By the end of the decade, it will be home to an estimated 60 million middle-class consumers, whose numbers are projected to grow to a quarter of a billion by 2050. footnote 3 And by 2035, their demand for imports is on course to top £1.4 trillion. footnote 4 The enormous scope of this market, where British goods and services are already sought after, represents an equally huge opportunity for UK businesses in the decades to come.
See this for context with the Comprehensive and Progressive Trans Pacific Partnership:
China and US are talking
India release:
Prime Minister Modi and Prime Minister Starmer welcome the conclusion of a mutually beneficial India -UK Free Trade Agreement and the Double Contribution Convention (May 06, 2025)
May 06, 2025
Prime Minister Shri Narendra Modi and Prime Minister of the United Kingdom H.E. Sir Keir Starmer had a telephone conversation today. The two leaders welcomed the successful conclusion of an ambitious and mutually beneficial India–UK Free Trade Agreement along with the Double Contribution Convention.
2. The Leaders described it a historic milestone in the bilateral Comprehensive Strategic Partnership that would foster trade, investment, innovation and job creation in both the economies. Both agreed that the landmark agreements between the two big and open market economies of the world will open new opportunities for businesses, strengthen economic linkages, and deepen people-to-people ties.
3. PM Starmer said that strengthening alliances and reducing trade barriers with economies around the world is part of their Plan for Change to deliver a stronger and more secure economy.
4. The two leaders agreed that expanding economic and commercial ties between India and the UK remain a cornerstone of the increasingly robust and multifaceted partnership. The conclusion of a balanced, equitable and ambitious FTA, covering trade in goods and services, is expected to significantly enhance bilateral trade, generate new avenues for employment, raise living standards, and improve the overall well-being of citizens in both countries. It will also unlock new potential for the two nations to jointly develop products and services for global markets. This agreement cements the strong foundations of the India-UK Comprehensive Strategic Partnership, and paves the way for a new era of collaboration and prosperity.
5. Prime Minister Modi invited Prime Minister Starmer to visit India. The leaders agreed to remain in touch.
New Delhi
May 06, 2025
Two press releases, plus some technicalities
UK-India Free Trade Deal: A Deal For Growth
The UK has secured the best deal India has ever agreed, providing businesses with security and confidence to trade with the fastest-growing economy in the G20.From:Department for Business and Trade, The Rt Hon Douglas Alexander MP and The Rt Hon Jonathan Reynolds MPPublished6 May 2025Last updated6 May 2025 — See all updates
Delivering Economic Growth
The core mission of this Government is to deliver economic growth that raises living standards and puts money in people’s pockets, and that is exactly what this deal will do. We estimate that it will increase bilateral trade by £25.5 billion, add £4.8billion a year to our economy and boost wages by £2.2 billion every year in the long run. footnote 1 This is the best deal India has ever agreed to. It delivers on our manifesto commitment to create trade relationships that unlock new opportunities for businesses across all our nations and regions.
Case study – Standard Chartered
Standard Chartered is a leading UK-based international banking group with a presence in 53 of the world’s most dynamic markets. It is the largest and oldest foreign bank in India, acting as a ‘super connector’ of cross-border trade and investment by driving commerce and prosperity through its unique diversity for more than 165 years.
Saif Malik, CEO, UK and Head of Coverage, UK, Standard Chartered, said:
The UK-India Free Trade Agreement is a significant achievement. It will create new opportunities for UK and Indian businesses, enable greater access to one of the world’s largest and most dynamic markets, and drive growth and innovation across the UK-India corridor.
We welcome this strong commitment to partnership and prosperity.
Case study – UPS
UPS is one of the world’s largest companies, with 2024 revenue of $91.1 billion, and provides a broad range of integrated logistics solutions for customers in more than 200 countries and territories, including connecting the United Kingdom and India.
Markus Kessler, Managing Director, UPS UK, Ireland and Nordics, said:
We welcome the announcement of this important agreement between two countries that are both vital markets in our global network.
We look forward to continuing to help businesses of all sizes across the UK reach new customers in one of the world’s most populous and dynamic countries.
Future-Proofing Our Economy
This deal gives UK businesses first-mover advantage with a new economic superpower. Currently the biggest country in the world by population, India is projected to move from its fifth-largest global economy to third in the next three years, thanks to the highest growth rate in the G20. footnote 2 By the end of the decade, it will be home to an estimated 60 million middle-class consumers, whose numbers are projected to grow to a quarter of a billion by 2050. footnote 3 And by 2035, their demand for imports is on course to top £1.4 trillion. footnote 4 The enormous scope of this market, where British goods and services are already sought after, represents an equally huge opportunity for UK businesses in the decades to come.
Case study – John Smedley Ltd
Established in 1784 in Lea Mills, Derbyshire, John Smedley Ltd is a UK-based manufacturer and retailer of luxury knitwear.
Bill Leach, Global Sales Director, John Smedley Ltd, said:
India is one of the fastest growing luxury markets in the world, and we are very excited about the UK- India Free Trade Agreement coming to fruition.
John Smedley knitwear is already sold in over 50 countries around the world, and now that the FTA has been finalised, we shall very much look forward to ensuring that an ever-increasing number of discerning luxury consumers in India will enjoy greater access to The World’s Finest Knitwear.
We are thankful to DBT for their significant efforts in bringing this FTA to successful conclusion.
Cutting costs for UK-India trade
From day one, this deal will support businesses across the United Kingdom by making it cheaper, easier, and quicker to trade with India. The deal will slash costs on UK exports, including whiskies and gin, cosmetics, medical devices, advanced machinery and lamb. Based on current trade alone, India’s tariff cuts amount to £400m in the first year, going up around £900m after 10 years. footnote 5 And that’s before factoring in the savings from speedier and easier trade from improved customs and digital commitments. This immediate relief represents a major advantage our businesses will enjoy over their international competitors, helping them to invest, expand, and support more high-quality jobs.
Case study – Smith+Nephew
Smith+Nephew designs and manufactures technology that takes the limits off living. Smith+Nephew’s products include: Advanced Wound Management; orthopaedics and a robot assisted surgery system; and joint preservation and soft tissue orthopaedics.
Deepak Nath, Chief Executive Officer, Smith+Nephew, said:
Given the size of the Indian economy and its healthcare system, India is an important location for Smith+Nephew. The Free Trade Agreement offers the potential to build trading links in the healthcare sector.
We hope that the Free Trade Agreement will enable Smith+Nephew’s innovative medical technologies to support more healthcare professionals to return their patients to health and mobility.
Delivering opportunities for High-Growth Sectors
This deal supports the UK’s world-leading high-growth sectors identified in the Industrial Strategy, including:
- Slashing tariffs for UK’s large and varied advanced manufacturing sectors, including for automotives, electrical machinery and high-end optical products.
- Giving the clean energy industry brand new and unprecedented access to India’s vast procurement market, as India makes the switch to renewable energy, alongside their growing energy demand.
- Unlocking new opportunities for medical devices firms within the life sciences sector, with reduced tariffs and rules of origin that factor in the UK’s complex supply chains and ensure that businesses can reap the benefits.
- Enshrining copyright protections for the creative sector, enabling our exporters to feel confident exporting to India with a commitment that works will continue to be protected for at least 60 years. India will also commit to engaging on aspects of Copyright and Related Rights. This deal addresses the interests of UK creators, rights holders, and consumers, including around Public Performance Rights and Artist Resale Rights, which acknowledge the importance of payment rights. India will also conduct an internal review of their copyright protection terms.
- Guaranteeing access for the UK’s world-class financial and professional business services sectors to India’s growing market. This is on top of securing India’s foreign investment cap for the insurance sector, ensuring UK financial services companies are treated equally to domestic suppliers, and encouraging the recognition of professional qualifications.
- Securing India’s best ever commitments on digital trade for our Digital and technology sectors, such as promoting digital systems and paperless trade, helping UK businesses of all sizes take the opportunities on offer in this huge and rapidly expanding market.
Case study – Premier League
The Premier League is the world’s most-watched football competition, reaching 1.6 billion viewers in 189 countries around the world. The global success of the Premier League makes it one of the UK’s most significant soft power assets, amplifying British cultural values and generating economic growth and inward investment.
Premier League Chief Executive Richard Masters said:
India continues to be incredibly important to the Premier League and its clubs. It is a vibrant country that presents exciting opportunities and significant potential. The Premier League’s recent announcement of an office opening in Mumbai demonstrates our commitment to build on longstanding work to engage local fans, develop grassroots and elite football and further promote the game in India.
The continued growth of the Premier League and UK businesses in India will have a positive impact on our domestic economy and we welcome the news of this new trade deal secured by Government, which will support UK businesses operating in India.
Case study – EY
EY teams work across a full spectrum of services in assurance, consulting, tax, strategy and transactions. Fuelled by sector insights, a globally connected, multidisciplinary network and a diverse ecosystem of partners, EY teams provide services in more than 150 countries and territories.
Rohan Malik, EMEIA and UKI Government & Public Sector Managing Partner, EY, said:
This agreement is poised to accelerate an economic partnership that is already thriving, with the value of total trade between the UK and India having more than doubled from £16.6bn to £40bn over the last decade.
British businesses stand to benefit substantially from enhanced access to one of the world’s largest export markets and a skills pool that can fuel strategically important UK sectors, including professional services and emerging industries based around data and AI.
Case study – Concrete Canvas Ltd
Concrete Canvas Ltd is a Wales-based low-carbon concrete manufacturer.
William Crawford, Director of Concrete Canvas Ltd, said:
India is a dynamic and vibrant economy and an increasingly important market for Concrete Canvas products. A UK-India FTA will help to accelerate our plans for growth by reducing trade barriers and making us more competitive.
This is welcome news for both UK and Indian businesses!
Case study – Biopanda
Biopanda is a Belfast-based medtech manufacturer which exports in vitro test kits for clinical laboratories, veterinary practice, and food safety laboratories.
Philip McKee, Sales Manager at Biopanda, said:
Biopanda have been supplying a range of diagnostic products to the Indian market throughout the past ten years.
We value the business we have done already throughout India and with the introduction of the UK-India FTA this should benefit in increased trade with the removal of export barriers.
This will hopefully increase the market access, allowing our distributors throughout India to provide a larger range of our highly accurate clinical diagnostic products at a lower price to the consumer.
Unlocking Opportunities Nationwide
Through our Plan for Change, this government will raise living standards in every part of the United Kingdom. This deal supports that goal, unlocking new opportunities in every region and nation.
This deal also opens a huge new market for iconic UK brands, securing India’s best ever tariff offer and providing access to India’s growing middle-class consumer base, which will give iconic UK brands the opportunity to expand their reach and influence. This access includes cutting tariffs on whiskies from 150% to 75% at entry into force, following to 40% after 10 years, as well as on other agri-food products such as soft drinks dropping from 33% to 0% after seven years, and lamb dropping from 33% to 0% at entry into force. Separately high-end cars will benefit from a drop from over 100% to 10% under a quota. We have also secured India’s best ever agreement on Rules of Origin, which enables UK businesses to take advantage of these new lower tariffs.
This deal will also support consumers as they benefit from the best of India and greater variety as our trading relationship grows, including clothing, footwear, and iconic food and drink. New commitments will also help protect consumers from spam texts from India, which could include requiring opt-out or prior consent.
Case study – Chivas Brothers Ltd
Chivas Brothers Ltd is part of the Pernod Ricard group of companies and exports over £2bn of Scotch whisky and gin every year, including brands like Chivas Regal, Ballantine’s, The Glenlivet and Beefeater. India is amongst Chivas Brothers’ largest export markets and the biggest consumer of whisky worldwide by volume. The UK-India trade agreement will help solidify and potentially expand on Pernod Ricard’s existing investments, which includes a €200m distillery construction in the Indian state of Maharashtra and £100m in bottling facilities in Dumbarton, Scotland.
Jean-Etienne Gourgues, Chivas Brothers Chairman and CEO, said:
The announcement of a free trade agreement in principle between the UK and India is a welcome boost for Chivas Brothers during an uncertain global economic environment.
India is the world’s biggest whisky market by volume and greater access will be a game changer for the export of our Scotch whisky brands, such as Chivas Regal and Ballantine’s. The deal will support long term investment and jobs in our distilleries and bottling plants in Scotland, as well as help deliver growth in both Scotland and India over the next decade. Slàinte to the UK Ministers and officials who steered the deal though long negotiations.
Case study – Diageo
Diageo is a global leader in beverage alcohol with a collection of brands across spirits and beer categories sold in more than 180 countries around the world. These brands include Johnnie Walker, Crown Royal, J&B and Buchanan’s whiskies, Smirnoff, Cîroc and Ketel One vodkas, Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness.
Diageo is a leading player in India’s beverage alcohol sector and is among the top 10 fast-moving consumer goods companies in India by market capitalisation. Diageo has 50 manufacturing facilities across India, employs over 3,300 people directly in market with a further 100,000 jobs supported throughout its value chain. India is one of Diageo’s largest markets globally and accounts for almost half of its total global spirits volume.
Diageo Chief Executive Debra Crew said:
The UK-India Free Trade Agreement is a huge achievement by Prime Ministers Modi and Starmer and Ministers Goyal and Reynolds, and all of us at Diageo toast their success. It will be transformational for Scotch and Scotland, while powering jobs and investment in both India and the UK.
The deal will also increase quality and choice for discerning consumers across India, the world’s largest and most exciting whisky market.
Enhancing Security through our partnership
The UK and India already enjoy a deep and broad partnership built on our shared principles as two democracies, our commitment to the rules-based international order, strong ties in areas including culture, education, food, and sport, and of course through our living bridge – with some 1.9 million people with Indian heritage calling the UK their home. footnote 6
This agreement encourages collaboration between our two complementary economies. It creates a framework to promote closer ties on innovation – including on new technologies in areas like agriculture, health, advanced manufacturing, and clean energy. And our agreement on business mobility will help experts on both sides deliver their services, enabling us to capitalise on the economic transformation that technology will bring over the course of this century.
Through this deal, we are showing the world that we stand for free, fair, and open trade. In an increasingly unstable and volatile world, this provides businesses with the confidence that they need to grow and expand. And as India’s approach to global trade changes, so can this deal. We have agreed in numerous areas that, if India offer a better deal to a different country, we can come back to the table to renegotiate for the UK.
Case study – Coltraco Ultrasonics
Coltraco Ultrasonics are high-exporting advanced manufacturers of ultrasonic instrumentation and systems, exporting 90% manufactured output to 120 countries. Coltraco have twice won the Queen’s Award for Enterprise in International Trade and have exported to India for 30 years. Since 2019, Coltraco have won the contract for nearly 200 ships of the Indian Navy and Coast Guard and support in-service use and maintenance of their ultrasonic watertight integrity instrumentation on board.
Professor Carl Stephen Patrick Hunter OBE, Chairman Coltraco Ultrasonics Limited & Director-General The Durham Institute of Research, Development & Invention, said:
Coltraco Ultrasonics is strongly supportive of the India FTA Trade Agreement and proud to have modestly contributed to and advising the British negotiating team on various chapters.
The UK private sector can now, because of the India FTA, the Windsor Framework CPTPP, and a variety of other UK FTAs, look out to the world, balancing our exporting and investment opportunities between the USA, the EU and Asia Pacific.
It is a tremendous success and we thank British and Indian Civil Servants for their public service in the UK-India FTA.
Unlocking Access to India’s Untapped Procurement Market
For the first time, UK businesses will have guaranteed and unprecedented access to India’s vast procurement market, covering goods, services and construction. UK businesses will be granted brand new access to approximately 40,000 tenders with a value of at least £38 billion a year. footnote 8 This will unlock significant opportunities spanning a range of sectors, including transport, healthcare and life sciences and green energy. Alongside this UK firms will, for the first time, have access to India’s procurement portal, connecting them to the information they need to make the best out of these opportunities – which will grow as India builds the infrastructure necessary for an economic superpower with the world’s largest population.
UK companies will also get exclusive treatment under the ‘Make in India’ policy, which currently provides preferential treatment for federal government procurement to businesses who manufacture or produce in India. However, this unprecedented treatment will mean that if at least 20% of a company’s product or service is from the UK, they will be treated as a ‘Class Two local supplier’– granting them the same status that is currently only ever given to Indian businesses.
Case study – Arup
Arup is an employee-owned business that provides engineering and technical and advisory services dedicated to sustainable development. It is headquartered in the UK and operates globally with around 18,000 members. It is a trusted partner of the government in India and has delivered a wide range of projects including the Bangalore international airport, the iconic Statue of Unity, and the Indian Railways Station Redevelopment programme.
Paula Walsh, Managing Director, UK, India, Middle East and Africa, said:
Arup supports the UK–India Free Trade Agreement and the powerful role this will play in boosting investment, jobs and growth. It is an important opportunity to deepen our collaboration with partners in India, sharing UK skills and technical expertise to deliver resilient and future-focused solutions across transport, energy, and the built environment.
We are proud to have been part of a recent delegation to India, sharing renewable energy expertise with government representatives and look forward to continuing this critical partnership.
Protecting Our Values
Throughout the negotiations, we have championed our values – securing India’s first ever chapters on anti-corruption, consumer protections, labour rights, the environment, gender equality, and development. We have protected the NHS, defended the UK’s interests, ensured the points-based immigration system is not affected, upheld our high food standards, and maintained our animal welfare commitments throughout. This deal demonstrates our commitment to both workers and businesses, staying true to our values while driving economic growth.
1. DBT CGE modelling. See Technical Annex
2. World Economic Outlook Database, October 2024
3. Projections are calculated using the methodology described in DBT’s Global Trade Outlook, February 2023
4. Ibid.
5. The methodology for estimating the value of duties can be found in Annex 5 of the technical annexes accompanying the UK-India FTA Scoping assessment
6. 2021 England and Wales Census; 2021 NI Census; 2011 Scottish Census
7. DBT inward investment results 2023 to 2024 (HTML version) – GOV.UK; ; Grant Thornton, Britain meets India 2024; Grant Thornton, India meets Britain tracker: 2023.
8. This analysis utilises Top 200 Entity data from India’s e-procurement dashboard, for the financial years 2020-21, 2021-22 and 2022-23, which is not exhaustively used by all federal government agencies for all procurements. Therefore, several entities included within India’s market access schedule cannot be included within the analysis. This analysis does not take into account restrictions on access as a result of Make in India, the chapter thresholds and tenders for goods or services not covered by the government procurement chapter.
Press release:
PM call with Prime Minister Modi of India: 6 May 2025
The Prime Minister spoke to the Prime Minister of India Narendra Modi today.From:Prime Minister’s Office, 10 Downing Street, Department for Business and Trade and The Rt Hon Sir Keir Starmer KCB KC MPPublished6 May 2025
The Prime Minister spoke to the Prime Minister of India Narendra Modi today.
The leaders began by celebrating the landmark UK-India Free Trade Agreement announced today – a deal which will add billions to the UK economy, boost wages and deliver on this government’s Plan for Change.
In a huge economic win for the UK, delivering for working people and British businesses, the Prime Minister underscored the need to go further and faster to get things done, to secure and renew our country.
Through pragmatism and purpose, the leaders noted that this historic deal is the biggest the UK has done since leaving the EU, and the most ambitious India has ever done. Prime Minister Modi also thanked the Prime Minister for his decisive leadership in getting the deal over the line.
Turning to the terrorist attack in Jammu and Kashmir last month, the Prime Minister reiterated his deep condolences at the tragic and senseless loss of life.
Finally, Prime Minister Modi extended an invitation to India, which the Prime Minister was pleased to accept and said he looked forward to visiting India at the earliest opportunity.
They looked forward to speaking soon.
Guidance
Technical note of the preliminary economic impacts of the UK-India Free Trade Agreement
Published 6 May 2025
Contents
- 1.Introduction
- 2.Preliminary modelling results
- 3.Model description
- 4.Modelling inputs
- 5.Method for calculating pound figures from modelling outputs
- 6.Method for assessment of impacts on tariffs
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1. Introduction
This technical note sets out the Department for Business and Trade’s (DBT) preliminary estimates for the economic impact of the UK-India Free Trade Agreement (FTA). It presents estimates for the impact on gross domestic product (GDP), bilateral trade, and wages.
The results are not a full and holistic assessment of the impacts of the FTA. They are a preliminary assessment to provide an initial understanding of the general magnitude and direction of impacts on trade, the economy and wages.
The department will publish an Impact Assessment (IA) of the UK-India FTA in due course. This will provide estimates of the economic impacts of a trade deal with India, including estimates of the sectoral, regional and environmental impacts.
2. Preliminary modelling results
These preliminary results are not forecasts. They represent the marginal economic impacts of the agreement compared with a counterfactual of no agreement in place, while maintaining all other factors affecting the UK-India economic relationship constant. A comparative static model is used which means that a comparison can be made of the economy before and after the introduction of the agreement, focusing on the long-term impact. The results therefore represent the estimated change each year resulting from a UK-India FTA, relative to a baseline of no FTA.
The model does not have an explicit time dimension. Nor does it provide results in pound sterling (£) values. To contextualise the modelling results in £ terms, we rely on 2040 trade and GDP projections. All £ values are derived based on the modelling outputs, expressed in percent change, and then converted to values in 2024 prices using projections in the 2023 Global Trade Outlook.[footnote 1]
The modelled impacts presented in this technical note are preliminary estimates which may be subject to future revisions. In particular, the results take no account of recent announcements on tariffs by the United States of America (USA) and other countries. These are not included in the modelled baseline and are not accounted for in the projections used to derive the £ values.
2.1 Macroeconomic results
The preliminary estimates for GDP and bilateral trade are modelled increases compared with their level absent of an FTA expressed in projected 2040 values. This provides an indication of the overall picture of the economy and trade with India after an FTA. Reflecting uncertainties underpinning the modelling and the potential that these results will be revised, this preliminary analysis is presented to 1 decimal place. Further detail on projections can be found in Section 5.
Table 1: GDP results
| £ billion change applied to 2040 projections (in 2024 prices) | Percentage (%) change | |
|---|---|---|
| Change in UK GDP | + £4.8 billion | + 0.1% |
Source: DBT modelling
Table 2: Bilateral trade results
| £ billion estimate, applied to 2040 projections (in 2024 prices) | Percentage (%) change | |
|---|---|---|
| Change in UK exports to India | + £15.7 billion | + 59.4% |
| Change in UK imports from India | + £9.8 billion | + 25.0% |
| Change in total trade between the UK and India | + £25.5 billion | + 38.8% |
Source: DBT modelling
Table 3: Wage results
| £ billion change compared with 2024 data (in 2024 prices) | Percentage (%) change | |
|---|---|---|
| Change in UK real wages | + £2.2 billion | + 0.2% |
Source: DBT modelling
3. Model description
3.1 Computable General Equilibrium (CGE) model
The analysis uses a Computable General Equilibrium (CGE) model developed by Purdue University, referred to as a Global Trade Analysis Project (GTAP) model throughout this technical note.[footnote 2] In line with international standards, CGE modelling is the best available technical framework for estimating the overall long-run impacts of a trade agreement. CGE modelling captures both direct impacts of an agreement, and impacts due to interdependencies between sectors.[footnote 3]
This analysis uses a standard multiregional, multisectoral, comparative static GTAP model with perfect competition and constant returns to scale. Further details on the model structure can be found in Annex 1 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) IA.[footnote 4]
The interpretation of the results
The estimated preliminary results are not forecasts. They represent the marginal economic impacts of the agreement compared with a counterfactual of no agreement in place, maintaining all other factors affecting the UK-India economic relationship constant. Therefore, while this modelling provides insights on the expected orders of magnitude of the economic impacts, it does not capture all possible factors affecting the future trading relationship between the UK and India.
No economic model is able to fully capture the complexity of the real-world and country-specific behaviours. Therefore, the model used, like all economic models, is based on several assumptions and stylised simplifications which must be considered when interpreting the figures.
A more detailed discussion of the uncertainties and limitations of the modelling can be found in Section 6, with full details in the ‘Uncertainty and analytical limitations’ section of the CPTPP IA.[footnote 5]
Database
The GTAP model requires a dedicated analytical database that includes a complete picture of national economies based on countries’ input-output tables, bilateral tariffs and trade flows, and a robust and comprehensive set of modelling parameters. The GTAP centre compiles the analytical databases combining raw source data from various sources, economic literature and additional in-house adjustments. [footnote 6]
DBT has used version 12p1 of the GTAP database for the CGE modelling. This is currently the most recent data set available for DBT’s CGE modelling, capturing global goods trade in 2019. The data set used is under pre-release and not publicly available at the time of modelling.
However, given updates in both reference year trade data from the current public database (2017) and the UK’s input-output (IO) table, using this data set ensures the most up-to-date data is used for this analysis. The database is currently being quality assured by GTAP ahead of eventual publication. Revisions made to the database for publication may lead to changes in the preliminary estimates. The direction of this change is uncertain.
The GTAP database is disaggregated into 65 goods and services sectors (GTAP sectors).[footnote 7]
As all CGE models need data on all trade routes and national production across all regions, they operate at an aggregated level. This may miss many of the nuances of supply chains and interlinkages that can provide a comprehensive understanding of the impacts of an FTA.
Adjustments to the database: the baseline counterfactual
The impacts of the agreement are assessed against a counterfactual baseline where the UK and India do not have an agreement with each other.
As the analytical database reference year is 2019, the baseline is adjusted to reflect the relevant recent trade policy developments not captured in the data.
This means incorporating:
- the UK exiting from the European Union
- the UK’s FTAs, including with Australia, Canada, Japan, New Zealand, Singapore and UK accession to the CPTPP
- India’s FTAs with Australia and United Arab Emirates
- updates to the Most Favoured Nation (MFN) tariffs imposed by the UK, under its Global Tariff (UKGT), for its largest trading partners
To the extent there are other recent sizeable changes in the levels or patterns of trade that are not captured in our baseline adjustments, their impact might not be captured in the modelling.
Due to the uncertainty associated with tariff announcements made by the USA and other countries, these are not reflected within the baseline.
4. Modelling inputs
The preliminary modelling results are produced by inputting estimates of changes in tariffs and non-tariff measures (NTMs), as a result of the agreement, into the CGE model.
Due to the preliminary nature of these estimates, they might be revised for the publication of a final IA.
4.1 Changes in tariffs
For a given GTAP sector, a trade-weighted tariff is estimated based on expected changes to each country’s tariff schedule. Where appropriate, adjustments are made to capture effective barriers to liberalisation.
Rules of Origin (RoO) adjustment
To access preferential tariffs as set out in the agreement, a good must meet the preferential RoO requirements. RoO requirements determine the source of a good and can vary between different goods. For example, one rule could require that a good is exclusively produced in the countries covered by the FTA, while another rule could require that a good is ‘sufficiently worked or processed’ from inputs. RoO requirements also set out what exporters must do to demonstrate their goods meet the requirements of these rules. Combined with the many factors that can influence an exporter’s decision to trade under preferential tariffs, estimating the cost of RoO compliance on exporters is difficult.[footnote 8]
Econometric estimates of non-tariff trade cost reductions implicitly capture RoO effects in estimating how historical FTAs have impacted trade, on average. However, these estimates are based on past agreements and are not specific to those in the UK-India context, or RoO in the UK-India FTA. To account for changes in RoO negotiated in the UK-India FTA, the level of tariff liberalisation in the Indian schedule has been adjusted downwards where required.
4.2 Approach for estimating Non-Tariff Measures for goods and services
NTM reductions for goods sectors
The Design of Trade Agreements (DESTA) database’s scores[footnote 9] of historic FTAs (from 1 to 7) is used to proxy for the depth of NTM reductions in past agreements. The tariff-equivalent sectoral NTM reductions from past FTAs as captured in the DESTA dataset are estimated using an econometric model. The agreement is then scored as to its depth to determine which estimated reduction from past agreements is applied to each sector based on policy input. Full details of this approach are outlined in Annex 2 of the CPTPP IA.[footnote 10] While the approach used for this analysis is consistent with that used in the CPTPP IA, the updated data used in the econometric model differs slightly.[footnote 11]
To estimate the reduction in NTMs from this agreement, it is assumed NTMs are reduced in line with:
- a medium depth agreement for industrial sectors, as proxied by a 4 in the DESTA database[footnote 12]
- a shallower agreement for the non-ferrous metals sector and agricultural sectors, that is equivalent to a DESTA 1
- no non-tariff trade cost reductions for the energy sector
NTM reductions in service sectors
The method used to calculate the NTM estimates for services is consistent with the approach used in the CPTPP IA. The Organisation for Economic Cooperation and Development’s (OECD’s) Services Trade Restrictiveness Index (STRI) is used to determine restrictiveness in the baseline and the scenario with an FTA. This change is inputted into an econometric model to estimate the reduction in service NTMs based on policy inputs. Further details on the approach can be found in Annex 2 of the CPTPP IA.[footnote 13]
The methodology uses OECD estimates of India’s MFN STRI and commitments under the General Agreement on Trade in Services (GATS). It also uses an estimate of the change in the STRI and newly bound regime under a UK-India FTA.[footnote 14] The latter has been proxied by modelling binding commitments equivalent to 30% of those found in CPTPP, alongside no change to the applied services regime for either party to the agreement. The STRI scoring of CPTPP is based on legal and policy judgments made by the OECD.[footnote 15]
4.3 Summary of inputs
The processes described are used to estimate a reduction in tariff and NTMs that reflect the expected provisions in the agreement for each GTAP sector. These are then fed into the CGE model. Table 4 shows the average reductions by broad sector categories, weighted by the relative trade in GTAP sectors that make up the broad sector, with the simple average reduction by broad sector presented in brackets.
Table 4: Trade-weighted average sectoral applied percentage point reduction in tariffs and NTMs (simple average in brackets)
| UK imports from India | UK exports to India | |||
|---|---|---|---|---|
| Sectors | Reductions in tariffs | Reductions in NTMs | Reductions in tariffs | Reductions in NTMs |
| Agri-food | 2.9 (5.1) | 2.3 (2.0) | 95.5[footnote 16] (8.4) | 1.9 (2.2) |
| Industrial goods | 2.3 (1.6) | 2.7 (2.6) | 5.2 (7.4) | 2.6 (2.6) |
| Services | Not applicable | 2.2 (2.5) | Not applicable | 7.3 (5.4) |
5. Method for calculating pound figures from modelling outputs
The preliminary macroeconomic impacts results presented in this document have been expressed in pound sterling (£) values. These are derived from the modelling outputs which are expressed in percentage changes. The methods used to calculate these preliminary macroeconomic impacts £ figures are the same as those used in the CPTPP IA and can be found in Annex 1 of the CPTPP IA.[footnote 17]
The data sources used to calculate the pound values are shown in Table 5. These metrics do not account for the tariff announcements made by the USA and other countries.
Table 5: Data sources used to convert CGE modelling impacts into pound sterling (£) values
| Key metrics | Data used |
|---|---|
| GDP | CGE model % impacts Office for Budget Responsibility (OBR) GDP data[footnote 18] OBR short[footnote 19] and long-term economic determinants (for 2040 estimates)[footnote 20][footnote 21] Office for National Statistics (ONS) GDP Deflators[footnote 22] |
| UK total trade and trade with India (exports and imports) | CGE model % impacts Global Trade Outlook 2023 projections of UK total exports and imports (for 2040 estimates)[footnote 23] For bilateral trade between the UK and India in 2040, it is further assumed that both the UK and India share of partner import demand evolves in line with their share of global import demand (as projected in the Global Trade Outlook 2023). ONS GDP Deflators[footnote 24] |
| Wages | CGE model % impacts ONS total UK wages data[footnote 25] |
6. Method for assessment of impacts on tariffs
This section sets out the method for estimating tariffs paid (duties) on existing trade between the UK and India, and duties corresponding to lines which are liberalised under the agreement.
6.1 Method for estimating duties
UK exports to Partner Country
Estimated duties on India’s imports from the UK are calculated by multiplying partner country MFN tariff rates as of 2022 by India’s imports from the UK in 2022 at the 8-digit product classification level. Using the agreement’s preferential tariff schedule, it is then possible to identify tariff lines subject to immediate (where tariffs are removed at entry into force) and long-term tariff reductions (immediate tariff reductions plus tariff reductions on goods that are subject to staged tariff removal), and aggregate corresponding estimated duties collected in these lines.
UK imports from Partner Country
To estimate annual tariff reductions on UK imports from India, the lower of the applied UKGT tariff rate and general framework of the UK’s Generalised Scheme of Preferences (where applicable) for developing countries (both applied in 2022) is multiplied by UK imports from India in 2022 at the 8-digit product classification level. For UK imports from India, His Majesty’s Revenue and Customs (HMRC) import data by preference is used, which provides a more detailed breakdown of the tariff regime by which a product enters the UK.
Using the agreement’s preliminary preferential tariff schedule, it is then possible to identify tariff lines subject to immediate (where tariffs are removed at entry into force) and long-term tariff reductions (immediate tariff reductions plus tariff reductions on goods that are subject to staged tariff removal), and aggregate corresponding estimated duties collected in these lines. The data are also grouped into intermediate or final consumption goods using the UN’s Broad Economic Categories (BEC5).
Reduced duties also reflect an equivalent reduction in government tariff revenues on these products, which may be partly offset by increased tax revenues from higher economic activity in the UK.
6.2 Limitations
Following a similar approach widely applied in the literature, the calculations aim to provide an indication of the magnitude of duties applicable to tariff lines that are liberalised.
These estimates are subject to a number of limitations:
- they are based upon 2022 trade and tariffs and do not take into account the likely changes in trade patterns resulting from tariff liberalisation
- these estimates assume full utilisation of all available preferences, which is unlikely to be the case in practice as businesses require time to adjust and utilise preferential trade agreements
- generally, it is businesses that pay tariffs and therefore save the cost of tariffs paid. These savings may be passed on to consumers, however, the proportion passed through to consumers is uncertain
- trade data by region does not account for inter-UK trade and may distort the picture as to where the actual gains are realised
- Global Trade Outlook February 2023 ↩
- For this analysis, DBT used RunGTAP user interface, which itself relies on GEMPACK software. ↩
- Trade Modelling Review Expert Panel Report, January 2022. ↩
- CPTPP: Impact Assessment, July 2023. ↩
- CPTPP: Impact Assessment, July 2023. ↩
- Databases – Global Trade Analysis Project. ↩
- Sectoral List – Global Trade Analysis Project ↩
- Factors that can influence an exporters decision to trade under preferential tariffs can include awareness and understanding of the agreement, the degree to which the incentive of preferential tariffs outweigh the associated costs of the usage of preferences and rules of origin. ↩
- Dür, Andreas, Leonardo Baccini and Manfred Elsig. 2014. “The design of international trade agreements: Introducing a new database”. Review of International Organizations, vol. 9, pp. 353-375. ↩
- CPTPP: Impact Assessment, July 2023. ↩
- The econometric model uses data from the USA International Trade Commission’s International Trade and Production Database for Estimation on the sectoral trade flows between 243 countries for the years 2000 to 2016. This data is mapped to 65 GTAP sectors (the level at which the regressions are run) and combined with HS6 tariff data from the World Integrated Trade Solution. Time-consistent networks of product codes have been used to ensure that product definitions stay constant in our tariff data, despite changes to HS reporting nomenclatures during our sample. ↩
- A medium level of liberalisation represents an agreement that goes far in alleviating the impacts of non-tariff barriers to trade but does not remove all non-tariff barriers businesses face when exporting. ↩
- CPTPP: Impact Assessment, July 2023. ↩
- STRI ↩
- The Regional Trade Agreements STRI ↩
- As these average reductions are trade weighted, this figure represents the large reduction in tariffs on beverages and tobacco, which makes up the majority of exports in the agri-foods sector. ↩
- CPTPP: Impact Assessment, July 2023. ↩
- OBR, Economic and fiscal outlook (March 2025) ↩
- Short-term determinants – OBR, Economic and fiscal outlook (March 2025) ↩
- Long-term determinants – OBR, Economic and fiscal outlook (May 2024) ↩
- OBR, Fiscal risk and sustainability – July 2023 ↩
- GDP deflators at market prices, and money GDP, ONS, March 2025 ↩
- DBT, Global trade outlook – February 2023 ↩
- GDP deflators at market prices, and money GDP, ONS, March 2025 ↩
- UK sector (S.1): Wages and salaries (D.11): Resources: Current price: £million: Seasonally adjusted (March 2025). ↩
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