With tariffs now being reduced on a wide range of products after the signing of free trade agreement between the two countries, India may forego customs revenue of ₹4,060 crore in the first year of the trade pact, think tank Global Trade Research Initiative (GTRI) said on Monday.
According to GTRI, the calculation is based on the current import figures from the UK.
The report further said that by the tenth year of the pact, as tariff elimination phases-in more broadly, the annual loss is expected to rise to Rs 6,345 crore or around British Pound 574 million, based on FY2025 trade volumes.
The FTA which was signed last week will lead to a loss of customs revenue for both the countries, as tariffs are reduced or eliminated on a wide range of goods, the think tank further noted.
In 2024-25, India imported USD 8.6 billion worth of goods from the UK and industrial products make up bulk of these imports. Additionally, these goods face a weighted average tariff of 9.2 per cent. “Most agricultural products—subject to much higher average tariffs of 64.3%—were excluded from tariff cuts, except for items like whisky and gin,” the report stated.
It also mentions that India is committed to eliminating tariffs on 64 per cent of the value of imports from the UK as soon as the implantation starts. “Overall, India will eliminate tariffs on 85 per cent of tariff lines and reduce tariff on 5 per cent of tariff lines or product categories,” it added.
Commenting on the same, GTRI Founder, Ajay Srivastava said, “Based on these factors, India’s revenue foregone in the first year of the agreement is estimated at ₹4,060 crore. By the tenth year, as tariff elimination phases in more broadly, the annual loss is projected to rise to ₹6,345 crore—or around £574 million—based on FY2025 trade volumes.” He further noted, “These figures are expected to increase as bilateral trade grows.”
He added that the UK imported USD 14.5 billion worth of goods from India in the last fiscal year, with a weighted average import tariff of 3.3 per cent.
Under the India-UK FTA, Britain has agreed to eliminate tariffs on 99 per cent of Indian imports. "This translates to an estimated annual revenue loss of British Pound 375 million (or USD 474 million or Rs 3,884 crore) for the UK, again based on FY2025 trade data. As Indian exports to the UK expand, the fiscal impact is likely to grow over time," the report further said.
Aiming to enhance bilateral trade to $120 billion by 2030, the trade pact between the two countries is expected to double the current trade volume. Additionally, the deal provides near-complete tariff elimination for Indian exporters, unlocking significant opportunities across various sectors.
India’s principal advantage under this agreement will be in duty-free access for its labour-intensive sectors, processed food items and other high-tariff product segments where India holds a strong competitive edge.
