This blog is written by Punit Gaur, a seasoned litigation and arbitration lawyer with over six years of experience handling complex commercial disputes. With a distinctive academic foundation in both B.Tech and LLB, he offers a balanced blend of technical acumen and legal insight, bringing a practical and strategic perspective to complex legal challenges.
Introduction
Over modern India-UK economic relations, the shadow of the colonial past is huge. British colonial control methodically took riches from India for almost two centuries, transforming a thriving economy into a provider of raw materials and a captive market for British goods. From a Third World or postcolonial standpoint, especially, this heritage of exploitation embodied in laws like the Charter Act of 1813 and the drain of wealth thesis espoused by Dadabhai Naoroji continues to shape how trade agreements between the two countries are seen.
Both India and the United Kingdom highlight 2024–25 as they discuss the outlines of a long-awaited Free Trade Agreement (FTA) as a sign of mutual prosperity and a new age of cooperation. While India expects more access for its textiles, IT services, and agricultural exports, the UK forecasts the pact will increase its GDP by £4.8 billion yearly. Underneath these hopeful forecasts, however, critical voices caution that the FTA might just reinterpret old systems under a neoliberal cover. Along with divisive topics like the Carbon Border Adjustment Mechanism (CBAM), the UK’s need for further access to Indian markets for cars, spirits, and financial services begs questions about asymmetric gains and the continuation of structural inequality.
From a Third World standpoint, the India-UK Free Economic Agreement (FTA) increasingly resembles a skillfully veiled continuation of neocolonial economic dynamics where the Global North reaps more than it sows, even while it is touted as a doorway to mutual prosperity.
Historical background: Second Innings in colonisation
Colonial-era economic trends that methodically destroyed India’s self-sufficiency still haunt the trade relationship between India and the UK. Policies like the Charter Act of 1813 opened Indian markets to duty-free British textiles under British rule (1757–1947), charging expensive taxes (up to 80%) on Indian exports in Europe.
By means of this intentional deindustrialisation, India’s vibrant handicraft industry fell from 24.4% in 1750 to 2.4% by 1900, hence lowering its part of world manufacturing. Pushed into congested farming, artists were enmeshed in rural poverty and dependent on exports of raw materials. Concurrently, thirty to forty per cent of national income was syphoned overseas yearly, while the drain of wealth theory quantified colonial extraction: India’s profits fueled British wars, pensions for colonial officials, and industrial progress in Britain.
Structural adjustment programs and neoliberal reforms carried on this disparity post-independence. While Global North economies kept subsidies and non-tariff barriers, Global South countries such as India were under pressure to open markets. Dependency theory helps to understand this dynamic: former colonies remain “peripheries”, providing cheap labour or resources to the “core,” therefore monopolising high-value output.
Modern FTAs typically mirror this hierarchy: 85% of UK goods entering India will eventually be duty-free, therefore risking market flooding similar to that of 19th-century textile imports. Concurrent with this, the Carbon Border Adjustment Mechanism (CBAM) of the United Kingdom threatens to tax $2.75 billion of Indian exports by 2027, therefore reflecting colonial extractions under fresh environmental pretexts.
This begs a basic question: Can “fair trade” between former colonisers and colonised under a global order still favour Northern capital? If we go deeper, the “fair trade” between former colonists and colonised countries is deeply damaged after a global order favouring the northern capital. Despite the language of equality and mutual use, structural imbalances rooted in colonial narratives are made up of modern trading systems.
Global institutions such as the WTO, IMF, and the World Bank often reflect the interests of developed countries, trade rules, intellectual property regimes, and regimes in ways that benefit transnational corporations and the northern economies. The old colonies, still relying on exporting raw materials and importing finished goods, are surrounded by unequal exchange conditions. This economic asymmetry, combined with limited negotiation power and sustained debt dependence, means that fair trade often acts as a more rhetorical ideal than a concrete reality in the Northern relationship.
India’s exclusion of delicate industries (diamonds, cellphones) from tariff reduction exposes defensive negotiating, but fundamental inequalities endure. The silence of the FTA on technology transfers or reparative investments points to continuity with colonial extractivism rather than rupture. The spectre of neocolonialism will linger until trade systems redress past abuses and fairly disperse value linkages.
Who has the advantage of the neoliberal trade framework?
Often touted as a road to world prosperity is the neoliberal trade framework, as institutionalised by the WTO and repeated in bilateral FTAs, such as the India-UK pact. From a Third World or postcolonial point of view, however, these systems methodically replicate the very dependence they assert will be eliminated. Global North writes the game’s rules; Global South is left to negotiate a landscape turned against its best interests.
The Investor-State Dispute Settlement (ISDS) mechanism runs at the core of these treaties. Bypassing domestic legal systems, ISD lets foreign investors sue sovereign nations before international tribunals. Apart from being opaque and expensive, this approach compromises host countries’ regulatory sovereignty, which is usually unacceptable for developing countries.
The United Nations Conference on Trade and Development (UNCTAD) claims that, with major financial and policy repercussions, over 70% of ISDS litigation is started by investors from rich nations against governments in the Global South. Governments fear expensive litigation and erratic arbitral rulings, so there is a well-recorded chilling effect on public interest regulation, environmental, labour, or public health.
Provisions on intellectual property and digital trade reinforce Northern dominance even more. Though India opposes the UK’s demand for more IP rights in the FTA, this reflects a larger trend: protecting pharmaceutical and technological monopolies under the cover of “innovation.” India’s generic medication market is still under protection for now, but digital trade chapters covering data transfers, source code, and cross-border services are frequently designed to benefit Western economies with established IT giants. This limits the policy space available to developing nations to foster their digital ecosystems or implement required data localisation rules.
Another feature of contemporary FTAs is regulatory harmonisation, which is sometimes a kind of economic coercion. It forces developing nations, independent of local context or developmental aspirations, to match domestic standards on commodities, services, and even environmental measures with those of the Global North. This alignment is not neutral; it locks out local innovation and favours the interests and capabilities of advanced economies, hence increasing compliance costs for home manufacturers.
Under the cover of liberalisation, FTAs such as the India-UK deal encourage reliance and asymmetry rather than a level playing field.
Variations in Bargaining Power
Though the UK’s post-Brexit need for new trade partners and India’s demographic and economic growth seem to be in line, the India-UK FTA negotiations expose ongoing disparities in negotiating leverage. Faced with reduced influence and market access following Brexit, the UK actively sought this agreement to safeguard its economic interests and world significance. Conversely, India used its position as the fastest-growing major economy in the world and its large market to negotiate concessions, including the exclusion of important sectors diamonds, smartphones, plastics, and some vehicles, from tariff reductions, and phasing in duty cuts to safeguard the home industry.
Still, under the surface, it is obvious who finally defines the terms: global capital and elite technocrats. Led by high-level bureaucrats from the trade ministry, the Indian negotiation team was commended for its strategic sense and ability to protect key sectors. But the process was mostly free from the direct involvement of those most impacted, labour unions, small farmers, and MSMEs, whose voices remain peripheral in high-stakes trade politics. Although the FTA is expected to help Indian professionals and increase bilateral trade to $120 billion by 2030, worries remain that the advantages will be disproportionately shared, favouring big businesses and export-oriented sectors over the larger base of India’s labour.
The language of strategic cooperation and mutual benefit hides the reality that discussions take place under a global economic system in which money speaks louder than democratic representation. Designed in elite venues, regulatory frameworks, tariff schedules, and market access clauses often reflect the goals of multinational investors and export lobbyists rather than those of average workers or small companies. Therefore, even with India’s increasing leverage, the structure and content of the FTA nevertheless show the ongoing impact of capital and technocratic knowledge over inclusive, democratic trade policies.
Effect on indigenous people and Indian farmers: a strike in the backbone
Particularly for Indian farmers, workers, and indigenous businesses, the home impact of the India-UK FTA is likely to be somewhat unequal. Strong resistance from farmers’ unions has been expressed, saying that lowered tariffs on British agricultural and processed food imports could lead to an inflow of cheaper, usually subsidised goods, therefore undercutting local producers and jeopardising India’s food sovereignty.
The government has banned some sensitive goods, including dairy, apples, and cheese, from concessions, but more general liberalisation runs the danger of exposing Indian agriculture to erratic foreign prices and weakening the support system of subsidies and minimum support prices that underlie rural life. This is consistent with the justification for India’s RCEP pullout, where comparable worries about agricultural vulnerability and lack of policy scope drove a last-minute departure.
Another problem is the FTA’s liberalising rules for services. The UK’s drive for more access in telecom, financial, and digital services could put pressure on India to loosen data localisation rules and privacy standards, compromising home data protection systems and exposing gig workers to unstable employment standards moulded by foreign tech giants. Without strong legislative protections, such liberalisation runs the danger of erasing digital sovereignty and exacerbating the precarity of India’s growing gig economy.
The competitive scene would get more hostile for Indian MSMEs. The FTA opens Indian markets to UK goods that benefit from superior technology, regulatory capital, and strict product standards, areas where tiny Indian businesses struggle to compete. Faster customs processing, lower technical obstacles, and mutual recognition of standards will benefit UK exporters; Indian SMEs may be excluded from the UK market should they be unable to satisfy demanding certification requirements. This dynamic reflects the WTO solar panel conflict in which India’s attempts to safeguard its home industry collided with international trade policies to produce negative decisions giving market access top priority over local development.
In the end, even if the FTA guarantees export profits for some industries, it runs the danger of escalating already existing disparities by favouring capital-intensive, export-oriented companies over the great majority of Indian farmers, workers, and small enterprises. The lessons from RCEP and WTO conflicts imply that liberalisation can damage the very groups it purports to benefit in the absence of strong domestic protections.
Effects on climate justice and sustainability
With both parties promising to respect ambitious climate targets and support renewable energy cooperation, the sustainability portion of the India-UK FTA is positioned as a watershed for “green trade. “With clauses on renewable energy, circular economy, and biodiversity, the UK claims the treaty as guaranteeing the biggest environmental requirements India has ever agreed to in a trade agreement. These pledges are non-binding, though, and the pact does not assign various duties based on India’s developmental level.
The proposed Carbon Border Adjustment Mechanism (CBAM) for the United Kingdom would be a crucial fault line since it taxes goods depending on their carbon footprint. Although pushed as a climate solution, such carbon taxes run the danger of being green protectionism, that is, of building new trade restrictions against Indian exports in areas including steel, aluminium, and chemicals. Long accepted in climate negotiations, this strategy ignores the Common But Differentiated Responsibilities (CBDR) concept, which says that developed countries should pay more for previous emissions and climate funding. Based on emission intensity, India’s own Carbon Credit Trading Scheme demonstrates the need to combine development with sustainability; yet, the text of the FTA does not ensure acceptance of this developmental necessity.
Environmental clauses devoid of a clear distinction between developed and developing nations run the danger of hiding severe economic disparities under the cover of environmental policy. Without clear protections, ESG criteria and carbon prices could turn from tools for allowing a fair transition for the Global South to tools for limiting market access and thereby supporting the Global North’s economic dominance. Therefore, absent differentiated responsibilities, sustainability clauses in the FTA could be more of tokens than tools of actual climate justice.
Conclusion
The UK free trade agreements seen in third world or post-colonial lenses reflect less of a break from the past than new packages of older hierarchies in the form of neoliberalism. Although we promise mutual growth and strategic partnerships, small prints show enduring asymmetry. It demonstrates historically rooted imbalances, investor-friendly conflict mechanisms, weak safeguards for farmers and KMEs, environmental regulations with risks in environmentally friendly protectionism and climate justice measures. FTAs are far from offering flat arenas, increasing the global trade architecture in which the Global North continues to determine terms economically, technically and normatively.
India’s defence strategies, such as the exclusion of delicate sectors, show maturity in negotiations, but rarely alter the structural disadvantages embedded in global trade. With limited participation in affected communities and inadequate safeguards for domestic interests, the agreement risks the capital-intensive sector, but alienates farmers, indigenous manufacturers and small businesses.
In the meantime, the climate and digital chapters can fix Northern regulatory control, unless exchanged for principles of justice and differentiated responsibility. If free trade is truly fair trade, it needs to be reinterpreted from scratch. Trade policies should no longer be confined to technical elite regions. It must make sense to include civil society, farmers, working groups and interest groups on a small scale. The global South, including India, must encourage alternative economic framework conditions rooted in solidarity, technology exchange, reparative justice and mutual resistance. Only through such integrated and election-oriented approaches can FTAs evolve from tools of neocolonial continuity to sustainable and common development.
Frequently Asked Questions
- In India, who could be negatively affected by this agreement?
Local businesses, workers and small farmers can be negatively affected by this agreement as they may face competition from cheap UK imports.
- Why is the ISDS clause controversial?
The ISDS allows foreign companies to sue the Indian government if they think their profits are harmed. This limits the Indian government from making its laws.
- Will FTA affect India’s digital and tech policies?
The UK wants easier data flow rules, which may challenge India’s efforts to keep data within the country and protect digital privacy.
