India and the United Kingdom inked the historic Free Trade Agreement (FTA) earlier this month. The zero-tariff clause on 99% of India's exports promises enormous support for India's MSME exporters, which account for nearly 45% of the country's exports. The trade pact will offer better market access for a wider range of Indian goods and services in the UK.
From textiles and jewellery to auto components and minerals, Indian MSME exporters now have new avenues to enhance their competitiveness and footprint in the UK. For instance, Surat's textile exporters can now sell sarees, fabrics, and ready-made garments at more competitive prices across London boutiques, while Moradabad's brassware manufacturers could expect better traction among UK retailers.
How this agreement is a game-changer for MSMEs
The India–UK FTA is expected to enhance market access for Indian MSMEs across key sectors. These include textiles and apparel, handicrafts, leather goods, gems and jewellery, food processing, engineering products, furniture, base metals, and auto components. Many of these products face UK import duties ranging from 4% to 16%.
Cost advantage and market expansion: Removing tariffs of up to 10% on garments, 8% on leather products, and similar amounts on other categories gives Indian MSMEs a price advantage. This could result in stronger demand from UK importers and retailers, offering MSMEs a chance to expand beyond regional trade hubs into one of the world's most sophisticated consumer markets.
Competing on equal terms: For years, Indian MSMEs have faced stiff competition from exporters in countries like Bangladesh, Vietnam, and Turkey that have enjoyed preferential access to the UK through other trade agreements. With this FTA, Indian exporters are expected to be able to match or beat global prices without adjusting margins.
Push toward formalisation and digitisation: To capitalise on the recently inked agreement, MSMEs must adhere to documentation, origin requirements, and quality standards. This will likely drive a broader shift toward formalisation and digitisation of trade processes, which align with India's larger push for e-invoicing, digital customs filings, and paperless logistics.
Across India's industrial landscape, MSMEs in key manufacturing hubs like Surat (textiles), Moradabad (handicrafts), Coimbatore (engineering goods), and Kanpur (leather) are already taking proactive steps to prepare for the opportunities presented by the India–UK FTA. Many are using tools to simulate trade costs under the new framework to identify profitable product-market combinations, automating export documentation, declarations and licensing documents. These steps will help businesses to remain audit-ready and enhance turnaround times, and map incentives to align FTA benefits with existing rebate schemes such as RoDTEP and EPCG.
While the India–UK FTA offers significant opportunities, Indian MSMEs must overcome several challenges to emerge as beneficial. Key among these is dealing with the UK's stringent non-tariff barriers, including sanitary and phytosanitary (SPS) standards, labeling requirements, and increasing ESG compliance. Additionally, a widespread lack of awareness and the complexity of documentation mean that many eligible MSMEs fail to utilize FTA benefits. Less than 30% of firms currently leverage such agreements due to limited knowledge and procedural hurdles. Moreover, customs and logistics preparedness are also essential. Accurate origin declarations, timely certification, and robust audit trails are critical for compliance. MSMEs lacking digitized trade systems risk disqualification, delays, or missed opportunities, making technological and operational readiness a priority.
The India–UK FTA is a call to action for India's MSMEs to upgrade, digitize, and globalize. With government support, access to compliance technology, and better trade intelligence, even the smallest exporter in India can now think beyond borders. The MSMEs are the backbone of India's export story. As this trade agreement unlocks new doors, leading tech-enablers in the export-import sector must ensure these enterprises walk through them confidently, compliantly, and competitively.