The latest free trade agreement (FTA) signed by India with the UK is likely to boost the competitiveness of Indian small and medium enterprises (SMEs) through enhanced market access, tariff reductions, and a simplified regulatory environment. Analysing the positive impact of the FTA, industry body PHD Chamber of Commerce and Industry said that with 99 per cent of Indian exports to the UK, including textiles, apparel, leather goods, marine products, and auto parts, becoming duty-free, it will increase the competitiveness of Indian SME in the UK market.
Moreover, the agreement includes provisions aimed at liberalizing non-tariff measures, such as product standards and technical regulations, which will lower market access costs for SMEs in order to enable easier entry into the UK market.
The trade agreement, concluded and announced by India on May 6, is projected to double the bilateral trade between two countries by 2030 from around $60 billion currently.
The FTA spans key sectors such as textiles, leather goods, marine products, auto components, and apparel — industries where SMEs play a leading role. The removal of duties on nearly all Indian exports is likely to enhance price competitiveness and breathe new life into sectors that were seen losing market share in recent years.
For instance, revival of labour-intensive sectors such as apparel and gems and jewellery, which witnessed a decline in market share over the past five years, stand to benefit from reduced tariffs, the chamber said. With deep employment linkages, these sectors are primarily sustained by SME players and grassroots exporters.
Speaking on the agreement, Hemant Jain, President, PHDCCI, said, “The FTA is expected to benefit SMEs, especially in labour-intensive sectors, through duty-free access, regulatory simplification, and improved mobility. It also supports digital trade and gender-inclusive growth, marking a major step in strengthening India–UK economic relations.”
The agreement is also expected to support women-owned SMEs, thanks to a dedicated chapter on enhancing the competitiveness of women-owned and women-led SMEs and encouraging their participation in international trade.
Further, FTA includes a social security agreement that exempts temporary Indian workers in the UK from dual contributions for three years. This will reduce operational costs for SMEs sending employees abroad. Also, SME can leverage the FTA to access new markets and clients in the UK particularly in sectors such as legal, accounting, auditing, and engineering, the chamber said.
With the latest trade agreement with the UK, India has signed 16 FTAs so far with countries including Australia, the UAE, EFTA (European Free Trade Association), Mauritius, Japan, Korea, etc.
A free trade agreement is a trade deal between two or more countries agreeing to certain obligations that promote their respective trade of goods and services and provide protection to investors and intellectual property rights, among other key benefits.