Indian companies in labour-intensive sectors — including textiles, garments, footwear, automobiles, and marine products — are gearing up to capitalise on the India-UK Free Trade Agreement (FTA), which came into force on Wednesday, 15 July 2025, according to a new industry report. The deal eliminates or reduces tariffs on approximately 99 per cent of Indian exports to the United Kingdom, potentially erasing a long-standing competitive disadvantage against rivals such as Bangladesh and Pakistan.

The Competitive Gap India Aims to Close

Until now, goods from Bangladesh and Pakistan entered the UK duty-free under the Developing Countries Trading Scheme, leaving Indian exporters at a structural disadvantage. The FTA levels that playing field. Dipali Goenka, Chief Executive of Welspun Living — the Indian company that manufactures championship towels for Wimbledon — said the agreement has already triggered closer coordination with British buyers.

'Many British brands that are our buyers came to India in recent weeks to chart a business roadmap for the next few years,' Goenka said. 'We typically did joint forward planning only for our U.S. customers, but now, with the deal, it's happening with U.K. clients too,' she added. On the home textiles opportunity, she noted: 'If you look at just home textiles, Pakistan's share of UK exports is at around 55 per cent, whereas India's is just 6-7 per cent. That's the gap we can finally cover.'

Key Beneficiary Sectors

Analysts identified the primary winners as sectors that previously faced UK import tariffs of 4 per cent to 16 per cent — including textiles, footwear, carpets, cars, seafood, and certain fruits. These industries could see higher export orders, larger shipment volumes, and improved profit margins as the tariff barrier falls away.

The British government has described the agreement as its biggest and most economically significant bilateral trade pact since leaving the European Union — a signal of how strategically the UK views the Indian market in its post-Brexit trade architecture.

The Utilisation Challenge

Despite the optimism, analysts cautioned that the overall impact is likely to be 'incremental rather than transformational'. Historically, only about 20-30 per cent of India's eligible exports have actually used FTA preferences — a structural weakness rooted in low awareness among smaller businesses. 'Historically India's utilisation of FTAs has been low because small businesses are often unaware of the new rules,' the report noted.

This is not a new problem. India's earlier trade pacts with ASEAN, South Korea, and Japan all saw below-potential utilisation in the first few years, particularly among MSMEs that lacked the documentation capacity to claim preferential rates. The India-UK FTA faces the same risk unless outreach efforts scale rapidly.

India's UK Export Baseline

According to data from the Global Trade Research Initiative (GTRI), India's exports to the UK reached $13.4 billion in FY26. Notably, more than half of those exports already entered the UK duty-free under its Most Favoured Nation (MFN) regime, meaning the FTA's marginal benefit is concentrated in the remaining portion — but that portion includes precisely the high-tariff, labour-intensive goods where India has the most room to grow.

With sectoral preparation underway and British buyers already visiting Indian factories, the early signals are encouraging. Whether the FTA delivers transformational scale or merely incremental gains will depend on how quickly India's export ecosystem — especially its small and mid-sized manufacturers — learns to navigate and leverage the new preferential framework.