India’s to lose ₹4,060 cr revenue in first year of trade pact with U.K : GTRI

By Admin

29 Jul, 2025

India’s recently signed free trade agreement (FTA) with the United Kingdom is expected to have significant fiscal implications in its initial years, according to the Global Trade Research Initiative (GTRI). The think tank estimates that India will forego customs revenue worth ₹4,060 crore in the first year of the agreement due to tariff reductions and eliminations across a broad range of imported goods.

Early Revenue Impact

The GTRI’s analysis, released on July 28, 2025, bases this revenue loss on current import data from the United Kingdom. In FY2024-25, India imported goods worth $8.6 billion from the U.K., most of which consisted of industrial products. These products typically face a weighted average tariff of 9.2%, and under the new FTA, many of these duties will be reduced or eliminated.

Tariff Elimination and Scope

As part of the agreement, India has committed to immediately eliminate tariffs on 64% of the value of imports from the U.K. Upon full implementation, tariffs will be eliminated on 85% of tariff lines and reduced on another 5%, impacting a wide variety of goods. However, high-tariff agricultural products typically subject to average duties of 64.3% have mostly been excluded, except for select items like whisky and gin.

Ajay Srivastava, Founder of GTRI, explained that “based on these factors, India’s revenue foregone in the first year of the agreement is estimated at ₹4,060 crore.”

Long-Term Fiscal Implications

The impact of the FTA is projected to grow over time. By the tenth year of implementation, as more tariffs are phased out, India’s annual customs revenue loss could rise to ₹6,345 crore (approximately British Pound 574 million), based on current trade volumes.

The U.K., too, is expected to experience revenue losses from the agreement. With imports worth $14.5 billion from India in the last fiscal year and a weighted average import tariff of 3.3%, the U.K. has agreed under the Comprehensive Economic and Trade Agreement (CETA) to eliminate tariffs on 99% of Indian imports. This would lead to a projected annual revenue loss of £375 million (about ₹3,884 crore or $474 million) for the U.K., which may increase as Indian exports to the U.K. expand.

Implementation Timeline

Although the agreement was signed on July 24, 2025, the full implementation could take up to a year as it awaits approval from the U.K. Parliament. Both nations are preparing for structural adjustments to balance the benefits of increased trade access with the short-term fiscal impact.

Conclusion

The India-U.K. FTA marks a major milestone in bilateral economic relations. While it promises enhanced market access and trade flow between the two economies, the GTRI’s findings serve as a reminder of the immediate fiscal costs involved. The key challenge for policymakers will be to ensure that the long-term economic gains from increased trade and investment outweigh the short-term revenue losses.