INDIA-UK FTA AND SECTORAL TRADE PERFORMANCE: EVIDENCE FROM INDIA’S TEXTILE AND PHARMACEUTICAL INDUSTRIES

Abstract

Purpose: - Present study examines the impact of the India-UK Free Trade Agreement (FTA) on India’s textile and pharmaceutical exports to UK. It also studies India’s Bilateral Revealed Comparative Advantage (BRCA) and the factors affecting exports and Foreign Direct Investment (FDI) between India and UK.

Design/methodology/approach: - The study is based on annual secondary data from 2000-2025. Trend analysis and BRCA are used to examine exports performance and competitiveness in textile and pharmaceutical sectors. Regression analysis and Gravity Model of Trade are used to examine the effect of GDP growth, Gross Fixed Capital Formation (GFCF), Exchange rate (ER), inflation, regulatory quality, and India-UK FTA on export and FDI. The study is also supported by the theories of comparative advantage and trade liberalisation. Further, several diagnostic tests such as multicollinearity, heteroscedasticity, and autocorrelation are applied to check the reliability of the models and to ensure robust results.

Findings: - The findings show that textile and pharmaceutical exports to UK increased during the study period, with pharmaceutical sector showing stronger growth. BRCA values indicate that India has a comparative advantage in both sectors. Regression results show that GDP growth, GFCF, ER, Regulatory quality and the FTA positively affect exports and FDI, where inflation has a negative effect. The study also suggests that trade liberalisation under the India-UK FTA can improve trade and investment relations between India and UK in the long run.

Research limitation/implications: - The study is limited to the textile and pharmaceutical sectors and uses annual secondary data. Since India-UK FTA has been recently signed, the study estimates its expected impact on current trade trends and economic indicators. The findings may help policymakers in improving trade policies and export competitiveness.

Originality/value: - The study is one of the few research works that examine both textile and pharmaceutical sectors together in the context of India-UK FTA using long-term data from 2000-2025. It also studies exports, comparative advantage, trade flows, and FDI together in a single framework.