How UK trade deal will give Indian exports edge over China, Bangladesh, Vietnam

India and the United Kingdom signed a free trade deal on Wednesday.

The two countries concluded the deal in May after years of negotiation.

Prime Minister Narendra Modi and his counterpart Keir Starmer have both hailed the deal.

Modi called the development a ‘historic day in the bilateral relations’.

“I am delighted that after the hard work of several years, our two nations have signed the Comprehensive Economic and Trade Agreement,” Modi said.

“It is a deal that will bring huge benefits to both of our countries, boosting wages, raising living standards and putting more money in the pockets of working people. It is good for jobs, it is good for business, cutting tariffs and making trade cheaper, quicker and easier,” Starmer added.

But how will the trade deal will give Indian exports an edge over countries like Bangladesh, Vietnam and China?

Let’s take a closer look:

What do we know?

Bilateral trade between the two countries was at $55 billion in 2023/24.

However, India comprises under 2 per cent of the UK’s imports.

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The FTA aims to double bilateral trade to around $120 billion by 2030.

Talks on a separate Bilateral Investment Treaty (BIT) remain ongoing.

Indian negotiators managed to eliminate tariffs on 99 per cent of Indian exports to the UK.

The deal will boost labour-intensive sectors such as textiles, leather, apparel and footwear, toys, marine products, gems and jewellery.

Many of these currently face tariffs ranging from 4 per cent to 16 per cent.

India could benefit to the tune of $2 billion thanks to the trade deal.

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This is because its exports would immediately become competitive over its neighbours including Bangladesh, Vietnam and China in several categories.

In textiles alone, there are 1,143 separate items that could benefit.

Readymade garments or home textiles, carpets, handicrafts and traditional items such as pashmina shawls or Kanchipuram or bandhini sarees will benefit.

India is currently the UK’s fourth-largest textile supplier to UK.

It comprises around six per cent of imports.

Indian officials say India’s footwear market could see a huge benefit particularly athleisure, sports shoes, Vellore and Kolhapuri chappals and traditional leather shoes.

India could also increase its share of UK’s $30 billion pharma imports.

India’s share in 2024 stood at just $1 billion

India could also gain when it comes to generic medicine, ECG and X-ray machines.

India exported chemicals worth $570 million to the UK in 2024.

The Centre is hoping to increase this by 30 to 40 per cent after more than 1,200 chemicals will receive duty-free access.

The gems and jewellery sector, where valued at $940 million, could also benefit.

Much of India’s overall gains could come from China.

China

After the British tariffs are done away with, India could become more competitive in exports in which China is currently dominant valued at $1 billion.

This includes categories such as machine parts, coffee, silver jewellery and footwear.

China in 2024 sent machine parts valued at $248.5 million to the UK. India, meanwhile, sent machine parts worth $215.3 million.

India exported coffee worth $12 million to the UK in 2024, while China sent coffee worth $11.1 million.

India could also massively benefit when it come to silver jewellery and footwear.

India’s exports to the UK in these categories comprise just a third of China’s.

India cut also cut China’s lead in the UK when it comes to processed food and baked items.

Indonesia

India could also cut into Indonesia’s exports in the UK.

This could potentially impact around 10 per cent of its exports.

It could occur in sports footwear and toys such as tricycles, scooters, and pedal cars.

Thailand and Vietnam

The deal could impact around 3.8 per cent of Thailand’s exports – goods worth around $200 million.

India could gain ground on Thailand when it comes to processed food preparations and baked items.

Vietnam could see its imports impacted to the tune of $346.6 million.

Pakistan and Bangladesh

Pakistan and Bangladesh could also take a hit.

Bangladesh could be impacted in about 4.8 percent of its exports to the UK.

However, keeping in mind categories with a tariff gap, that figure could rise to 7.6 per cent.

Pakistani exports could be impacted by between 2.3 per cent to 15 per cent.

Its exports to the UK are currently estimated at $2.14 billion.

Exports in apparel, footwear, and food products such as spices and fish could be impacted.

Bangladesh could suffer heavily when it comes to leather and textiles.

“Leather exports are expected to increase their market share in the UK by five percentage points.”, an official told The Hindu.

With inputs from agencies