India’s recently signed Free Trade Agreement (FTA) with the United Kingdom is expected to result in a Rs 4,060 crore loss to customs revenue in its inaugural year, as per estimates from the Global Trade Research Initiative (GTRI). The fiscal repercussions are projected to increase each year, reaching Rs 6,345 crore, approximately £574 million, by the tenth year of its implementation, according to a report.

The trade agreement, finalized last week, requires gradual tariff reductions on a significant range of British imports, particularly industrial goods, which currently incur an average duty of 9.2 percent. Ajay Srivastava, founder of GTRI, remarked: “Considering these elements, the revenue that India will forgo in the first year of the agreement is estimated to be Rs 4,060 crore.”

In the fiscal year 2024–25, India imported goods worth $8.6 billion from the UK. With this agreement, tariffs on 64 percent of the import value will be eliminated immediately, with further cuts increasing the total to 85 percent of tariff lines, as report. However, agricultural imports, except for high-tariff items such as whisky and gin, will largely remain unaffected.

Conversely, the UK imported $14.5 billion worth of Indian goods during the same timeframe. The UK is anticipated to lose £375 million (Rs 3,884 crore) in customs revenue annually, due to its pledge to remove duties on 99 percent of Indian imports under the Comprehensive Economic and Trade Agreement (CETA).

While the agreement is expected to stimulate bilateral trade and enhance market access, it also raises concerns regarding its effects on government revenue, especially in the short to medium term.

The FTA is still pending parliamentary approval in the UK, with full implementation potentially taking up to a year.