India will face a revenue loss of Rs 4060 crore in the first year of FTA with Britain, claims GTRI

India is likely to lose customs revenue of Rs 4,060 crore in the initial year of free trade agreement with Britain, as taxes on several items have been lowered or abolished. Think tank Global Trade Research Initiative (GTRI) stated this on Monday, quoting current import data from Britain.

The report said that by year 10, as the tariff elimination is widely implemented in a phased manner, the annual loss is estimated to increase to Rs 6,345 crore or about 574 million British pounds based on FY 2025 trade volume.

GTRI has said that the India-UK free trade agreement signed on July 24 will reduce customs revenue of both countries, as duties on various items have been reduced or eliminated. India imports goods worth USD 8.6 billion from the UK in 2024-25. These imports comprise a large proportion of industrial products and attract a weighted average tariff of 9.2 per cent.

The majority of agricultural goods, with the exception of products such as whisky and gin, which enjoy a very high average tariff of 64.3 per cent, have been left out in the tariff reduction. It stated India has pledged to reduce tariffs immediately on 64 per cent of the value of the goods that are being imported from the UK.

Overall, India will eliminate tariffs on 85 per cent of tariff lines and reduce tariffs on 5 per cent of tariff lines or product categories. "Based on these factors, India's revenue loss in the first year of the agreement is estimated to be Rs 4,060 crore," said Ajay Srivastava, founder of GTRI.

He said the UK imported goods worth USD 14.5 billion from India last fiscal, with a weighted average import duty of 3.3 per cent. Under the Comprehensive Economic and Trade Agreement (CETA), the UK has agreed to eliminate tariffs on 99 per cent of Indian imports.

"This will result in an estimated annual revenue loss of 375 million British pounds (or USD 474 million or Rs 3,884 crore) to the UK, based on FY25 trade data. The fiscal impact is likely to increase over time as Indian exports to the UK grow," the report said. The agreement may take about a year to come into force as it will require approval from the UK Parliament.