Divya Agarwal
New Delhi [India], June 30: Trade agreements can have a wider range of effects than just reducing tariffs. They can influence long-term investment decisions, corporate expansion plans, and job creation. Bilateral investment flows are increasingly seen as a reflection of broader economic relationships rather than just trade ties, as companies look for more stable markets and diversified supply chains. Against this backdrop, India’s investment presence in the UK has remained strong, and with the upcoming India–UK Comprehensive Economic and Trade Agreement (CETA), the momentum is expected to continue.
Data from the UK Department for Business and Trade shows that India became the second-largest source of FDI for the UK in 2025–26, with 93 investment projects generating 12,687 jobs. India was second only to the United States, which recorded 239 projects and 15,796 jobs created. Germany, France and the Netherlands followed at a distance.
The numbers underline India’s growing role as an overseas investor as the economic relationship between the two countries continues to deepen. The India–UK CETA, set to come into force on July 15, is expected to reduce trade barriers and encourage deeper business engagement between the two markets.
The agreement provides duty-free access for nearly 99% of Indian exports to the UK and opens market access across 137 services sub-sectors. Beyond trade facilitation, the pact is also expected to improve the predictability of the investment environment through stronger regulatory cooperation and business certainty.
The UK is also emerging as an important destination for Indian overseas investments. In 2025–26, Indian companies undertook 830 overseas investment projects in the UK, making it one of India’s top four investment destinations, after the United States, the United Arab Emirates and Singapore.
Sector-wise, Indian investments remain concentrated in financial, insurance and business services (4,607 projects), followed by wholesale and retail (2,599 projects) and manufacturing (2,369 projects). This distribution reflects sectors where Indian companies already have a strong global presence and steady cross-border expansion.
Industry experts believe the trade agreement could further strengthen these investment trends by shifting corporate strategies from trade-led engagement to long-term operational presence.
According to Pallavi Bakhru, Partner at Grant Thornton Bharat, while traditional sectors such as financial services, manufacturing and wholesale trade will continue to dominate, the agreement could open opportunities in newer areas.
She noted that digital and technology services, fintech, advanced manufacturing, healthcare and medical devices, professional services and clean energy are likely to emerge as key investment drivers. Improved market access, greater regulatory predictability and stronger supply chain integration could support investment decisions in these segments.
A key takeaway is that the agreement goes beyond tariff reduction. It is expected to expand services trade access and improve regulatory alignment, encouraging companies to make longer-term investment commitments rather than short-term export-focused decisions.
Industry bodies also expect British investment in India to rise following the agreement. ASSOCHAM President Nirmal K. Minda said that easier market access, lower tariffs, streamlined customs procedures and stronger support for digital trade would help create a more predictable business environment.
He added that India’s strong economic growth and large consumer base will continue to attract British companies looking to expand operations.
While the full impact of CETA will become clearer over time, current investment trends already show strengthening economic ties between India and the UK. The agreement is expected to further boost bilateral investment flows, support established sectors and create new opportunities in technology, clean energy and advanced manufacturing.
