Prime Minister Narendra Modi during a bilateral meeting with U.K. Prime Minister Keir Starmer on the sidelines of the G20 Summit, in Rio de Janeiro. File
| Photo Credit: PTI

India and the U.K. on Tuesday (May 6, 2025) sealed an ambitious free trade deal along with a double contribution convention with Prime Minister Narendra Modi saying that the landmark pacts will catalyse trade, investment, growth and job creation in both the economies.

Mr. Modi made the announcement on the agreements after a phone conversation with his British counterpart Keir Starmer.

“In a historic milestone, India and the U.K. have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention,” Mr. Modi said in a social media post.

EXPLAINED | India’s proposed free trade agreement with the U.K.

“These landmark agreements will further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies,” he said.

Mr. Modi said he was looking forward to welcoming Mr. Starmer in India soon.

The leaders described it as a historic milestone in the bilateral Comprehensive Strategic Partnership that would foster trade, investment, innovation and job creation in both the economies. Both agreed that the landmark agreements between the two big and open market economies of the world will open new opportunities for businesses, strengthen economic linkages, and deepen people-to-people ties.

Also Read | India committed to Free Trade Agreement with the U.K., says Modi

The Prime Minister’s Office said the two leaders agreed that expanding economic and commercial ties between India and the U.K. remain a “cornerstone” of the increasingly robust and multifaceted partnership.

“The conclusion of a balanced, equitable and ambitious FTA, covering trade in goods and services, is expected to significantly enhance bilateral trade, generate new avenues for employment, raise living standards, and improve the overall well-being of citizens in both countries,” it said.

“It will also unlock new potential for the two nations to jointly develop products and services for global markets,” it added.

“This agreement cements the strong foundations of the India-U.K. Comprehensive Strategic Partnership, and paves the way for a new era of collaboration and prosperity,” the PMO said in a statement.

A view of the International Monetary Fund logo at its headquarters in Washington, D.C., U.S., November 24, 2024.
| Photo Credit: REUTERS

The International Monetary Fund (IMF)’s April Outlook held that India would surpass Japan to become the fourth largest economy. The global financial institution tasked to promote economic stability estimates India’s gross domestic product, at current prices, is expected to scale about $4,187.02 billion in 2025. This would be marginally higher than its nearest peer Japan estimated to reach $4,186.43 billion. United States (with a GDP of $30,507.22 billion), China ($19,231.71) and Germany ($4,744.8 billion) continue being the three largest economies globally in the same order.

The outlook further projected that India would be able to achieve their ambition of becoming a $5 trillion economy by 2027. This would be after two successive years of GDP growth at about 9.9% and 10.2% respectively. IMF further projects that India’s GDP would exceed $6.8 trillion by 2030.

A scrutiny of IMF data also indicated that India’s GDP growth rate in 2026 and 2027 would be, notwithstanding the individual size of the larger economies, higher than that of the U.S., China, Japan and United Kingdom, among others.

Indian economy projected to grow 6.2% in 2025

IMF further underlined that the Indian economy is projected to grow 6.2% in 2025 and 6.3% in 2026. The global financial institution promoting financial stability underlined that the growth outlook is relatively more stable at 6.2% in 2025 supported by “private consumption, particularly in rural areas”. However, it held that the rate was 0.3 percentage points lower than their projections published in January indicative of “higher levels of trade tensions and global uncertainty”.

It is also noteworthy that India’s projected rate of economic growth is also higher than that of China (4%), U.S. (1.8%), Japan (0.6%) and UK (1.1%).

Benchmark indices Sensex and Nifty ended lower in a range-bound trade on Tuesday (May 6, 2025) due to profit booking, mainly in banking and oil shares, and investors staying on the sideline amid escalating tensions between India and Pakistan.

Snapping its two days of gains, the 30-share BSE Sensex declined 155.77 points or 0.19% to settle at 80,641.07. During the day, it dropped 315.81 points or 0.39% to 80,481.03.

The NSE Nifty dipped 81.55 points or 0.33% to 24,379.60.

The trading activity was range bound ahead of the U.S. Federal Reserve’s policy decision and concerns over U.S.-China trade negotiations, analysts said.

The Union Home Ministry has directed states and UTs to hold security mock drills in light of the rising Indo-Pak tensions after the Pahalgam terror attack.

Close to 300 ‘civil defence districts’ with sensitive installations like nuclear plants, military bases, refineries, and hydroelectric dams will be covered by mock drills on air-raid warning sirens, civilian training for a “hostile attack” and cleaning of bunkers and trenches.

Among Sensex firms, Eternal, Tata Motors, State Bank of India, Adani Ports, NTPC, IndusInd Bank, Bajaj Finance, Asian Paints, Axis Bank and Sun Pharma were the major losers.

Bharti Airtel, Tata Steel, Mahindra & Mahindra, Hindustan Unilever, Nestle and Maruti were among the gainers.

Also Read: Pahalgam terror attack LIVE: Union Home Secretary to review preparations for mock drills

“The domestic market has been consolidating in recent sessions following the strong recovery, driven by cautious sentiment amid India-Pakistan border tensions. Weak earnings growth for the current quarter has further impacted the market.

“Meanwhile, investors are closely monitoring India’s bilateral trade negotiations with the U.S. Additionally, speculation around the U.S. Federal Reserve is drawing attention, as no rate cuts are expected in the near term, affecting global trends,” Vinod Nair, Head of Research, Geojit Investments Limited, said.

India’s service sector activity accelerated slightly in April largely driven by a quicker increase in new order inflows, which also underpinned a faster expansion in employment, according to a monthly survey on Tuesday (May 6, 2025).

The seasonally adjusted HSBC India Services PMI Business Activity Index reached 58.7 in April, up from 58.5 in March, indicating a sharp and stronger expansion in service sector output.

“Market volatility was further aggravated by escalating geopolitical tensions between India and Pakistan, coupled with uncertainty surrounding the U.S. Federal Reserve’s upcoming interest rate decision,” Siddhartha Khemka, Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd, said.

“Looking ahead, progress on the U.S. trade deal could provide near-term support to the markets, he said. However, ongoing geopolitical concerns and the earnings season are likely to keep investor sentiment cautious in the near term,” Mr. Khemka added.

The BSE smallcap gauge dropped 2.33% and midcap index declined 2.16%.

Among sectoral indices, realty tanked 3.49%, power (2.64%), services (2.53%), utilities (2.36%), industrials (2%), capital goods (1.71%) and consumer durables (1.59%).

Auto and tech were the only gainers.

In Asian markets, Shanghai’ SSE Composite index and Hong Kong’s Hang Seng settled higher. South Korean and Japanese markets were closed due to holidays.

Markets in Europe were trading lower. U.S. markets ended in the negative territory on Monday (May 5, 2025).

Foreign Institutional Investors (FIIs) bought equities worth ₹497.79 crore on Monday (May 5, 2025), according to exchange data.

Global oil benchmark Brent crude jumped 2.76% to $61.85 a barrel.

The 30-share BSE benchmark climbed 294.85 points or 0.37% to settle at 80,796.84 on Monday (May 5, 2025). The Nifty rose by 114.45 points or 0.47% to 24,461.15.