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How India’s free trade agreements could shift global food and beverage trade

India’s free trade agreement with the UK, finalised in May, could mark the first in a trio of significant deals this year as the country opens up to increased global trade.

The UK-India deal, which is likely to be signed by Indian Prime Minister Narendra Modi during his visit to the UK in July or early August, reduces tariffs on 90% of goods and eliminates them entirely on 85% of tariff lines within a decade.

It is the one of many major bilateral trade agreements India has concluded in recent years, while negotiations with the EU and the US are also under way. The shift in policy could create new opportunities for food and beverage exporters and importers.

Lamb and whisky producers welcome tariff cuts

The UK agreement includes significant tariff reductions on key British exports, particularly in the food and drink sector. Tariffs on Scotch whisky, for example, will drop from 150% to 75% immediately, and fall to 40% over the next 10 years.

Lamb exports, previously subject to a 33% tariff, will now be tariff-free.

“This is excellent news for [our] lamb processing members,” commented Tony Goodger, head of communications at the Association of Independent Meat Traders, shortly after the agreement was concluded.

These changes position UK exporters to tap into India’s expanding middle-class consumer base, which is estimated to include over 430 million people.

The UK government heralded the agreement as “the best deal any country has ever agreed with India”, but some analysts were more grounded in their assessment.

Jane Foley, head of FX strategy at Rabobank, said in May that the deal would “go some way to counter the negative impact of trade headwinds, but [it] may not be enough to counter the larger impact stemming from a slowdown in the UK’s major trading partners”.

Free trade agreement: Some barriers remain

While the UK deal offers clear benefits for certain sectors, it excludes dairy products, where India has maintained high tariffs to protect its domestic industry.

According to the Agriculture and Horticulture Development Board (AHDB), a levy board funded by British farmers, UK exporters are likely to continue to face duties of up to 42% on milk powders, 40% on butter, and 32% on cheese, limiting their competitiveness in the Indian market.

In the red meat sector, while lamb exporters are expected to benefit from the removal of tariffs, cultural and religious restrictions in India mean that UK beef exports are unlikely to materialise.

Pork exports, though limited in the short term, could see improved market access over time at the same time as demand grows with India’s middle class expanding.

The AHDB welcomed the deal and noted that the agreement provides “some opportunities by improving access to a large and growing market”, but emphasised that these opportunities are likely to be realised in the longer term rather than immediately.

India’s negotiations with the EU

Negotiations with the EU, which began in 2022, are centred on a free trade agreement aimed at reducing tariffs and improving market access for goods and services. Both sides have agreed to pursue a two-stage approach to finalise the deal, with the next round of talks scheduled for later this year.

The EU – India’s largest trading partner ahead of the US and China – has emphasised the importance of regulatory alignment, particularly in sectors such as food and beverage, where European exporters face significant barriers to entry.

According to an analysis by Brussels-based think tank Bruegel, India’s recent trade agreements with Korea and Japan have resulted in loss of market share for European producers, highlighting the urgency of concluding a comprehensive deal.

Can India dodge Trump’s tariffs again?

Negotiations also remain under way with the US. Talks are focused on concluding the first phase of a comprehensive trade deal by September or October, with an interim agreement expected before 1 August to avoid the reinstatement of tariffs imposed by the US earlier this year.

Agriculture remains a contentious issue in these discussions, as the US seeks duty concessions on dairy products, apples, and tree nuts. India has historically resisted opening its markets in these areas, reflecting its commitment to protecting domestic producers.

The forceful approach by the US has prompted some strong criticism in India. Ajay Srivastava, founder of the Global Trade Research Initiative think tank, told local media: “Trump's model isn't a free trade agreement, it's a YATRA: Yielding to American Tariff Retaliation Agreement.”