US and UK Trade Deals Test Make in India Ambitions

India’s recent interim trade framework with the United States and its free trade agreement (FTA) with the United Kingdom mark historic shifts in India’s commercial strategy. Both deals are being touted as catalysts for Make in India and a springboard for the technology sector. Yet, a closer look at the economics and numbers suggests the benefits may be more nuanced—offering opportunities alongside significant challenges for domestic manufacturing and technological ambitions.

Under the interim US deal, Washington agreed to cut reciprocal tariffs on Indian goods from punitive levels of up to 50% to 18%, immediately improving market access for labour-intensive categories such as textiles, engineering goods and pharmaceuticals.

This reset could help Indian manufacturers restore competitiveness in the world’s largest consumer market. India’s merchandise exports to the US already exceeded roughly $86.5 billion in fiscal 2024-25, making the United States its largest export destination. Industry analysts project that India’s goods and services exports could reach a record $1 trillion in 2026-27 due to tariff relief and new trade deals.

However, the US framework also signals India’s intention, though not a binding commitment, to purchase $500 billion worth of US goods over the next five years. Some economists warn this could expand India’s trade deficit and distort market priorities. Balancing tariff gains with a surge in US imports risks weakening the domestic manufacturing base if not accompanied by production incentives.

Across the UK deal, India secured zero duty on 99% of its exports to Britain, with tariff concessions covering nearly the entire trade value. Labour-intensive sectors such as textiles, leather, gems and jewellery stand to benefit significantly from expanded access to the British market. Negotiation estimates suggest that the pact could increase bilateral trade by around £25.5 billion annually by 2040 (roughly $34 billion).

Indian tariffs on UK imports will also be substantially reduced. For instance, duties on British automobiles could fall from over 100% to 10% under quota arrangements, while UK spirits such as whisky and gin will see steep tariff reductions over time.

Implications for Make in India

While both deals open markets, they also weaken the protective barriers on which the Make in India programme historically relied. Launched in September 2014, the initiative aimed to raise manufacturing’s share of GDP to 25% (from ~15-16%) and create 100 million manufacturing jobs. However, despite a decade of push, manufacturing’s share of Gross Value Added has not reached 25%; in some years, it has even declined.

“Make in India was always a sham. Manufacturing’s contribution to gross value added has actually declined over the past 11 years. That has never happened in post-1991 India,” says Santosh Mehrotra, Visiting Prof at University of Bath, UK. 

While India has seen record FDI inflows over the past decade, only certain manufacturing-linked sectors like electronics and automotive components have benefited meaningfully.

Reducing tariffs may further affect domestic manufacturing by increasing competition from foreign producers in India’s domestic market, particularly in capital-intensive sectors such as automotive, machinery and electrical equipment, potentially squeezing local manufacturing margins.

The US deal protects around 90-95% of Indian agricultural products from inclusion, a political safeguard but also a strategic limitation on broader market liberalisation.

Both the India-US and India-UK trade agreements are unlikely to materially strengthen India’s manufacturing base. Mehrotra explains that despite high-profile initiatives such as Make in India and the Production Linked Incentive (PLI) scheme, manufacturing’s share in gross value added has declined rather than risen. “Most PLI incentives have been concentrated in electronics assembly, with limited deep localisation or technology transfer,” he says.

In this view, the trade deals may provide tariff relief and marginal export gains, but they do not address structural weaknesses in industrial policy, job creation or domestic capability building.

Tech Sector: Services Win, but Innovation Struggles

For the technology sector, both trade deals send mixed signals.

On the services front, eased digital trade and regulatory cooperation with the UK and US could benefit Indian IT and software firms, already integral to global services supply chains. UK tariffs on skilled mobility respond to long-standing demands from Indian professionals.

Yet, deeper industrial collaboration in advanced areas—semiconductors, AI infrastructure and critical technologies—depends less on tariff cuts and more on strategic policy alignment and local capability building. Although access to hardware and components is facilitated by tariff reductions in the US framework, India still faces structural hurdles in domestic fabrication and R&D ecosystems.

India’s intention to import large amounts of US energy, aerospace and ICT products indirectly underscores how technology and capital goods dependencies may persist rather than diminish.

Mehrotra is sceptical of claims about India becoming a tech power. “If we are such a software superpower, why is all our data held by foreign companies? GPUs are essentially computers. If we continue importing them instead of building them, what exactly is our long-term strategy? They (Big Tech) will collect our data, build large language models using it, and hold that data. Where is the domestic vision in that?” he asks.

On the technology front, the primary concern centres on strategic dependence. While India promotes itself as a software and AI talent hub, critical infrastructure—GPUs, cloud platforms, data centres and digital storage—remains largely controlled by foreign firms.

“Increased imports of AI hardware and large-scale foreign data centre investments may expand capacity, but they do not automatically translate into technological sovereignty or domestic innovation. Without a coherent R&D and manufacturing strategy, the deals risk reinforcing India’s role as a services and back-office economy rather than positioning it as a technology originator,” says Sudeep Bhattacharyya of Axis Bank.

The Bigger Picture: Integration with Risk

Together, the US and UK deals signal a shift from protectionism toward pragmatic integration with major Western economies—a necessary move for scale, exports and geopolitical alignment. However, they must be paired with an industrial policy that strengthens domestic manufacturing, deepens tech innovation and supports higher-value exports.

“Both deals have merit, but they serve different strategic purposes for India’s tech ecosystem. But they must preserve India’s ability to regulate data, digital services, and platform ecosystems independently. Technology shouldn’t just be traded; it must be governed in a way that protects data sovereignty, innovator rights, and national security,” says Akhil Gupta, Co-founder, Nobroker and Convozen.

This means India should pursue leadership in technical standards and data governance frameworks that empower domestic innovation while participating in global markets.

Gupta adds that tariff gains for Indian exporters would matter more if local firms can compete on productivity, quality and technology domestically and internationally. “Without those complementarities, the deals could simply reorient India’s production towards assembly and services, leaving higher value-chain moves to foreign partners.”

From a long-term technology leadership perspective, experts believe that the US partnership holds a slight advantage due to the scale of tech collaboration, capital flows, and strategic alignment on emerging technologies.

Moreover, for India, the US is a much bigger market than the UK.

In other words, trade agreements of this scale are not just about tariffs or export numbers. They are about whether India can translate access into capacity, and leverage global partnerships to evolve Make in India into Create in India—for both manufacturing and technology.