India–UK free trade agreement (FTA): Implications for bilateral trade and logistics

The recently agreed Free Trade Agreement (FTA) between India and the UK promises to reshape bilateral trade flows by reducing or eliminating tariffs across several sectors, including pharmaceuticals, textiles, alcoholic beverages, electronics, food and agriculture, and automotive components. This tariff reduction is expected to drive a surge in goods movement between the two nations.

Increased bilateral trade activity

UK exports such as premium range of alcohol (whisky, gin), vehicles, electronic equipment, medical devices, and financial services are set to gain a stronger foothold in the Indian market. Simultaneously, Indian exports including textiles, chemicals, engineering goods, and food and agro products will benefit from improved market access in the UK. According to estimates from the UK Government, the potential trade upside from the FTA could be an additional US$33.95bn.

Ports like Nhava Sheva, Mundra, and Chennai in India and Felixstowe, Southampton, and London Gateway in the UK are likely to witness a significant rise in both bulk and containerized cargo. Logistics corridors connected to these hubs, such as the Western Dedicated Freight Corridor, will become even more critical. Furthermore, smaller Indian ports like Kakinada may experience increased volumes due to duty reductions on commodities like rice and seafood.

Trade routes connecting India, the Suez Canal, and the Europe are expected to see a volume uptick. In the medium to long term, the India–Middle East–Europe Economic Corridor (IMEC), though not directly tied to the UK, could become strategically significant. This route offers an alternative pathway for Indian goods to reach Europe faster via the Middle East and Mediterranean—potentially benefiting UK-bound cargo, especially in scenarios where traditional shipping routes such as the Suez Canal face disruptions.

Air cargo volumes are also set to increase, particularly through key Indian airports such as Delhi, Mumbai, Hyderabad, and Bangalore. High-value and time-sensitive goods like pharmaceuticals and electronics will primarily drive this growth. The FTA is expected to spur incremental investments in port handling, air freight stations (AFS), warehousing, and freight infrastructure. Logistics operators will likely need to reassess shipping schedules and ensure container availability to meet the evolving demand.

Rules of origin: A critical compliance challenge

One of the key components of the FTA is the ‘Rules of Origin’ clause, which outlines the level of production or value addition required in each country for a product to qualify for preferential tariffs. These provisions are designed to prevent goods from third countries from gaining duty-free access through minor processing activities.

While these rules may nudge countries towards developing local supply chains and undertaking substantial transformation, they could also pose challenges if exporters continue business as usual. For instance:

• Products using imported components may need to meet specific thresholds for local value addition or undergo substantial value addition to benefit from reduced tariffs
• Sectors such as electronics, textiles, and automotive parts may need to document origin and processing details to qualify.
• Indian manufacturers often source raw materials or components from non-FTA countries like China making Rules of Origin compliance tricky.
• Many small and medium Indian exporters are unaware of exact Rules of Origin thresholds or compliance systems.

To ensure adherence without compromising efficiency, Indian logistics firms and exporters will need systems that track inputs, document transformation processes, and generate valid certificates of origin—either digital or physical. Non-compliance could result in lost tariff benefits or delayed shipments.

What compliance strategies can be put in place?

• Enforce smart customs filing using the Indian National Logistics Portal companies can submit electronic origin certificates and track value-add content digitally.
• Pre certify common products for repeat exports like standard auto parts and garments; get advance rulings or long-term supplier declarations of origin this will speed up processing and avoids repetitive document work.
• Train suppliers and staff by running workshops or onboarding guides on rules of origin by focusing on origin calculation and documentary evidence required this will ensure compliance across the supply chain.

Adapting to sustainability provisions and CBAM

The UK, following the lead of the EU, is advocating for stronger sustainability and climate-linked provisions, such as a Carbon Border Adjustment Mechanism (CBAM). This policy framework imposes carbon tariffs on imported goods based on the emissions generated during their production.

For Indian exporters, this means emissions-intensive products could be taxed additionally unless carbon footprints are transparently tracked and disclosed. The UK may also require environmental certifications, carbon audits, and evidence of sustainable supply chain practices. This extends to logistics as well, pushing providers to invest in low-emission transport and green logistics infrastructure.

While these requirements pose initial challenges, they could serve as a catalyst for Indian exporters to adopt sustainable practices, ultimately offering a competitive edge in other markets with similar regulations, like the EU.

Adaptation measures:

• Measure and report emissions across production and logistics.
• Invest in cleaner technologies and shift to low-emission transport modes for example rail over road and shipping over air.
• Join voluntary sustainability programs or get certifications that show commitment to low carbon practices.
• Collaborate with UK buyers to align on environmental goals and share data.

Long-term implications for logistics and supply chains

In the longer term, the India–UK FTA is poised to transform logistics and supply chains:

• Logistics companies will need to integrate carbon pricing and CBAM compliance into their core strategies. Early movers offering advisory or tech-enabled compliance solutions could gain an edge.
• Rising trade volumes will drive demand for shipping, warehousing, and customs services, especially around key industrial zones and ports. For instance, Ludhiana may benefit from increased winterwear exports, and Tiruppur is likely to see growth in knitwear exports.
• India may accelerate investments in freight corridors, port modernization, air cargo terminals, and cold chain logistics to handle expanded trade volumes.
• Indian suppliers are expected to establish UK-based distribution hubs, while UK firms may look to invest in Indian sourcing and logistics networks.
• Green transport and renewable energy investments are likely to rise across logistics operations.
• To stay competitive, logistics companies will need to offer digital tracking, faster customs clearance, and greener transport solutions.

As the FTA moves forward, it brings not only trade opportunities but also responsibilities—challenging exporters and logistics providers to adapt quickly while building resilience and sustainability into their operations.

This article was featured on Logistics Insider on 4 June 2025. Read it here