India UK impact beneficial for various sectors such as Textiles, Gems & Jewellery, Liquor, Auto, IT will be key beneficiaries

Impact on Textile Sector:

• The total textile and other related products import by UK stood at around ~US $23.2bn. India’s share in the textile and related products share stood at 7% amounting to US $1.7bn while Bangladesh has around ~17% share amounting to about ~US $4bn. China commanded highest share of ~25% with over ~US $ 6bn worth of textile exports to the UK.
• In Apparels, India has 5% share while Bangladesh has 14% share and China commands about 21-22% share.
• India pays tariff of 8-12% on textile exports (including apparels and home textile products) while Bangladesh and Vietnam do not pay any tariffs on exports of textile products to UK.
• Significant reduction in tariff rate or no tariffs will provide India competitive advantage compared with other major exporters. India has advantage of cheap labour cost and high cotton supply, which benefit the domestic textile producers in long run. Large companies with integrated business model and high standards of quality production should benefit at large.
• So, companies like Gokaldas Exports, KPR Mills, SP Apparels (already has strong presence in UK), Indo Count and Welspun Living will benefit from the FTA in medium to long run.

Impact on gems and jewellery sector:

• Custom duty on gems export from India is 0% but VAT of 20% is charged in UK while custom duty on jewellery is 2.5% and VAT of 20% is also charged.
• Under FTA, with UK there won’t be any levies or duty on import of gems and jewellery products. This augurs well for jewellery exporting companies. It will be positive for gems and jewellery companies such as Titan among others. 

Impact on FMCG sector:

• Deal provides opportunity for FMCG companies to explore opportunities in segments such as staples, condiments and ready to eat products.
• Tata Consumer products already have presence in the Indian market in black tea and premium tea segment. The company expand into categories such as Pulses and ready to cook products through Tata Sampann brand.
• ITC can leverage on its strong product portfolio in processed foods segment can explore opportunities to expanding into new categories in UK. 

Impact on Footwear sector:

• India is not a major exporters of footwear products. However lower tariffs on footwear products are Positive for Indian footwear companies such as Bata India, Metro brands, Relaxo footwear to explore opportunities in UK market. 

Impact on Liquor sector:

• India will be cutting tariffs on scotch whiskies and gin imported from UK from 150% to 75%, following it to 40% over the period of 10 years.
• The reduction in tariff on scotch whisky or gin will be cost effective for Indian liquor manufacturing companies. Most of these companies imports scotch in bulk quantity to blend with their premium liquor brands. Hence reduction in tariff will help to reduce the import cost of raw material.
• Luxury scotch and liquor segment is very small compared to overall liquor market in India.
• Any foreign brand trying to enter the Indian market does not have distribution presence in the country and will try to enter into the Indian market through potential tie-up with the Indian company.
• Overall, our interaction with liquor companies suggest the reduction tariff on scotch whisky provides cost opportunity rather than significant risk on sales volumes of the premium products in the near term. 

Impact on Auto sector:

• As per FTA, UK will have a quota to sell 22,000 high-value electric vehicles (EVs) to India at a reduced 10% import duty, down from over 100%, while India will get a quota to export low- and mid-range EVs to the UK under similar tariff benefits.
• This arrangement benefits companies like Jaguar Land Rover (part of Tata Motors) by easing market access, particularly for premium EVs, while Indian automakers see long-term potential in exporting domestic made EVs such as Tata’s upcoming Avinya, M&M's BEVs & Maruti Suzuki’s e-Vitara to the UK.
• Overall, the FTA opens new opportunities for bilateral EV trade but maintains safeguards to support India’s growing domestic EV manufacturing base. Reduced import tariffs on premium EV’s is not seen negative for domestic EV players especially M&M.
• Outside these quotas, tariffs on EVs remain high, and for internal combustion engine vehicles, duty-free imports are also limited to predefined quotas with gradual tariff reductions planned to help Indian manufacturers adjust.  

Impact on IT sector:

• FTA will exempt Indian professionals working temporarily in the UK and their employers from contributing to social security funds for an initial period of three years, addressing a long-standing concern and reducing operational costs for Indian service providers, ultimately enhancing their competitiveness in the UK market.
• We believe that this agreement is anticipated to spur investments from the UK entities into the Indian companies and will likely benefit the almost Indian IT players who have exposure in UK. Major exposure is for Mastek (60% of mix from UK) and Infosys, HCL Tech, FSL, Coforge, Newgen and more who have ~25-30% of their revenue mix from UK/EMEA as it will boost opportunities and mobility for Indian talent, further easing the company’s operations in the geography.