UK’s Industrial Strategy Anchored by India-UK FTA

On June 23, 2025, the United Kingdom unveiled its ambitious ten‑year Modern Industrial Strategy, placing the recently concluded India–UK Free Trade Agreement (FTA) at the heart of its vision for sustainable economic growth. British Prime Minister Keir Starmer, in the foreword, described the strategy as “a new approach for a new era”, reaffirming that the UK will remain an “unashamed champion of global trade”, with the India FTA exemplifying its uncompromising commitment to open markets. Starmer underscored that this strategy “marks a turning point for Britain’s economy and a clear break from the short‑termism and sticking plasters of the past”, signaling the dawn of a new industrial and diplomatic partnership model.

Central to the strategy is the assertion that “international trade and investment play a crucial role in driving economic growth, but the global landscape is changing,” and government must be “pragmatic, agile, and smart in navigating this environment”. The plan envisages a high‑growth, sector‑specific focus, including advanced manufacturing, clean energy, life sciences, creative and digital technologies, defence, financial and professional services, sectors identified as engines of long‑term prosperity. It further commits to reducing electricity costs by up to 25 percent for energy‑intensive manufacturers from 2027, aligning UK industrial competitiveness with other major economies.

At the centre of the economic narrative stands the India FTA, hailed as a “smart approach to foster free and open trading relations”. The strategy projects that reducing tariff and non‑tariff barriers across high‑growth sectors will inject an additional GBP 25.5 billion annually into bilateral trade in the long run. Trade Secretary Jonathan Reynolds echoed this enthusiasm in Parliament, calling the pact “a huge economic win for the UK, the best deal that India has ever offered” and noting that it grants the UK “a genuine competitive advantage in manufacturing”.

From the Indian perspective, Commerce and Industry Minister Piyush Goyal, present in London during the release of the strategy, emphasized that the FTA brings “stability and predictability” to businesses on both sides, unlocking confidence to invest and innovate. He added that India’s streamlined parliamentary processes will facilitate ratification of the deal “as soon as the legal scrubbing is done and the document is sorted out”.

Functionally, the FTA carries the potential to shape supply‑chain resilience and economic complementarity. Minister Goyal stated that India is focusing on FTAs with economies that “complement rather than compete” with its own. He envisaged the pact as a “good marriage”, enabling both nations to collaborate in innovation, build resilient supply chains, and add value for mutual benefit.

The strategy also outlines tangible economic instruments to leverage this partnership. UK Export Finance will be enhanced, and the British Business Bank empowered to take equity stakes in startups—catalysing innovation in sectors dovetailing with Indian strengths in IT services, pharmaceuticals, and clean energy. A newly revamped Board of Trade, composed of industry leaders, will guide small and medium‑sized enterprises (SMEs) to capitalise on fresh export and investment opportunities born out of the India FTA.

The diplomatic significance of positioning the India FTA as a cornerstone of the industrial strategy cannot be overstated. Starmer’s declaration that “we have showcased this approach through our new deals with the US, EU, India, Japan and our engagement with China” reinforces the UK’s intent to weave India into a web of strategic economic partnerships. Indeed, the India FTA is its largest bilateral deal since Brexit, far exceeding past accords in both ambition and projected scale.

India’s strategic goal of integrating into global value chains finds resonance in British industrial policy. Experts noted the FTA’s tariff eliminations across textiles, footwear, chemicals, and automotive goods—Indian tariffs on autos decreasing from 100 percent to 10 percent over time, as laying the groundwork for expanded MSME participation in global markets. Similarly, UK sectors such as advanced manufacturing, whisky, cosmetics, and medical devices stand to benefit from improved market access and streamlined customs procedures.

Yet, alongside these opportunities come complexities. Aligning standards and certification procedures will challenge smaller suppliers, particularly in chemicals, electronics, dairy and textiles. Meanwhile, alignment with emerging regulatory frameworks like the EU’s Carbon Border Adjustment Mechanism may expose exporters to compliance costs or tariff risks in future trade environments. Finally, the parallel negotiation of a bilateral investment treaty raises critical issues around sunset clauses and investor protections, affecting capital flows between the two economies.

Against this backdrop, the Modern Industrial Strategy serves both as an economic roadmap and a diplomatic commitment. Unlocking energy‑cost relief, increased R&D investment (including up to £2.8 billion more in advanced manufacturing), support for clean energy technologies, and a ten‑year funding horizon are poised to buttress the framework through which bilateral trade will grow. The venture capital infusion targeting UK start‑ups also dovetails with India’s fast‑growing innovation ecosystem, offering avenues for co‑development and finance that transcend conventional trade.

In cumulation, the UK’s new industrial strategy with its India‑centred trade thrust encapsulates a convergence of economic and diplomatic priorities. It underscores a shift from transactional engagement to strategic partnership, recognising that in a rapidly evolving global order, economic resilience is built not only on domestic capability but also on substantive, long‑term collaboration. Quoting Starmer: “Government must be pragmatic, agile, and smart in navigating this environment,” and the India FTA becomes the legislation by which such pragmatism will materialize.

Together, the UK and India chart a common path of economic integration grounded in trust, foresight, and shared prosperity. As legal ratification and implementation processes unfold, this strategy positions both nations at the vanguard of what could be a defining pillar in twenty‑first century global commerce.