News & Trends

What are the Implications of Recent Trade Agreements on Stocks?

Implications of Recent Trade Agreements on Stocks

According to the IMF’s World Economic Outlook, India is set to overtake Japan and become the world’s fourth-largest economy in 2025, with a GDP of about $4.18 trillion. One of the key engines behind this growth is India’s import-export industry. In fact, during the 2024–25 financial year, India’s exports reached an impressive $820.93 billion.

India has long-standing trade relationships with many countries—one of the most notable being with the United Kingdom. This connection dates all the way back to the 1600s, and now it’s stronger than ever thanks to a new Free Trade Agreement (FTA).

What is a Free Trade Agreement (FTA)?

Implications of Recent Trade Agreements on Stocks
Implications of Recent Trade Agreements on Stocks

Before we dive into the India-UK deal, let’s quickly understand what an FTA is. Simply put, it’s an agreement between countries to reduce or remove trade barriers like tariffs and import limits. The goal is to make it easier and cheaper to trade goods and services.

The India-UK FTA: A Big Step Forward

In May 2025, a historic Free Trade Agreement between India and the UK came into effect. This deal marks a big milestone for both countries.

Background and Goals

Before the FTA, Indian goods faced an average tariff of 4.2% in the UK, while the UK faced a much higher average tariff of 14.6% when exporting to India. Some UK products, like cars, were even hit with a whopping 100% duty.

That all changed on May 6, 2025, when Prime Minister Narendra Modi announced the new FTA. The main goal? Boost trade and grow both economies. The UK expects to save around £400 million per year initially, with that number growing to £900 million annually over the next decade. India will also benefit from lower tariffs and increased export opportunities.

What’s in the FTA?

Here are some of the key highlights of the India-UK Free Trade Agreement:

Implications of Recent Trade Agreements on Stocks
Implications of Recent Trade Agreements on Stocks

1. Tariff Reductions and Market Access

  • Around 90% of UK products will see reduced tariffs in India, and 85% of them will eventually become completely duty-free over the next 10 years.
  • Major UK exports like whisky, gin, cars, and medical equipment will benefit. For example, car tariffs will go down from over 100% to just 10%, under a quota system.
  • On the other hand, 99% of Indian exports to the UK will be tariff-free, making it easier to sell products like textiles, leather goods, gems and jewellery, and engineering items.

2. Sensitive Sectors Protected

Some industries, like dairy, poultry, apples, and certain industrial goods, are excluded from tariff cuts to protect local producers in India.

3. Support for Professionals

The agreement makes it easier for professionals like engineers, architects, and consultants to work in both countries. It also simplifies visa processes and exempts temporary workers from paying social security in the host country for up to three years.

4. Support for ‘Make in India’

UK businesses will have access to India’s public sector market and may get preference in government projects under the “Make in India” initiative.

5. Focus on Fairness

This FTA includes commitments to labor rights, women’s participation, anti-corruption efforts, and consumer protections—a first for Indian trade agreements.

Why This Relationship Matters

The India-UK trade relationship isn’t just about numbers—it’s about shared growth. Here’s why it’s important:

Implications of Recent Trade Agreements on Stocks
Implications of Recent Trade Agreements on Stocks
  1. Market Access: Indian companies gain easier entry into UK markets, and British firms tap into India’s massive and growing economy.
  2. Economic Growth: More trade means more jobs, more businesses, and stronger economies on both sides.
  3. Strategic Partnership: The UK brings tech and healthcare expertise, while India brings scale and innovation. It’s a win-win.
  4. Better Choices for Consumers: With more products on the market, consumers get better quality and more variety at competitive prices.

Also Read: How to Build an Emergency Fund Effectively?

How the FTA Impacts the Indian Economy

India is ranked as one of the world’s most restricted markets for services by the OECD. So, this FTA opens new doors and sets a bold precedent.

Implications of Recent Trade Agreements on Stocks
Implications of Recent Trade Agreements on Stocks

Increase in Trade Volume

After the FTA was signed in 2025, trade between the two countries is expected to grow by $34 billion each year by 2040. Back in 2024, the total trade volume was around £42.6 billion (about $60 billion), with the UK exporting £17.1 billion and importing £25.5 billion from India. This is set to double to $120 billion by 2030.

Sector-Wise Impact

Winners in the UK:

  • Alcohol (whisky, gin)
  • Automobiles
  • Medical and cosmetic products

Winners in India:

  • Textiles and apparel
  • Gems and jewellery
  • Seafood and leather goods
  • Engineering goods and auto components

Looking Ahead

By 2040, India’s economy will not only be bigger, but smarter and more connected with global partners like the UK. This FTA is a big leap forward, not just in trade numbers, but in opportunity, innovation, and shared prosperity.

Post Comment