UK-India Trade Relations & Currency Implications: Starmer’s Visit to Mumbai

Who Should Read This?

• UK businesses trading with India or considering expansion there
• Importers/exporters concerned about FX risk and currency strategy
• Investors and financial officers monitoring GBP/INR movements
• Anyone interested in how trade policy shifts affect currency flows

Why It’s Worth Reading

• To understand how the new UK-India trade framework may impact exchange rates
• To see which sectors might benefit or be challenged by FX shifts
• To gain insight into risk scenarios from delays or political setbacks
• To know how Indigo FX can help you navigate these changes with customised strategies

What You’ll Learn

• Key features of the UK-India Free Trade Agreement (FTA) and its timeline
• How tariff cuts, trade flows, and investment may shift GBP/INR and broader GBP pairs
• Risks from negotiation delays, regulatory changes, and global uncertainty
• FX strategies UK-India traders should consider now

Introduction

When UK Prime Minister Keir Starmer visits Mumbai (8–9 October), one of the central focuses will be advancing the implementation of the recently signed UK-India Free Trade Agreement (FTA). For UK businesses and currency managers, that trip has real implications for trade, investment, and exchange rates between the Pound and Indian Rupee (and more broadly, Sterling’s strength).

Trade agreements affect the demand and supply of currencies. When two economies commit to reduced tariffs, smoother regulatory access, and stronger investment ties, FX flows shift. The UK-India FTA aims to unlock new export potential, reduce costs, and bolster bilateral commerce. Let’s explore what that means for currency markets, and for your FX strategy.

Key Features of the UK-India FTA & Economic Projections

• The UK-India agreement, signed in July 2025, offers near-elimination of tariffs across many sectors.
• According to the UK government’s technical note, reductions in import duties benefit UK exports to India and imports from India.
• Long-term modelling suggests bilateral trade may increase substantially: UK exports to India could rise by ~60%, while imports from India may increase ~25%.
• The agreement also includes provisions beyond goods — covering services, procurement, and regulatory harmonisation.

These shifts in trade dynamics will affect currency demand. More UK goods shipped to India create demand for INR → GBP flows. Likewise, increased imports from India require GBP → INR outflows. The net effect will depend on trade balances, investment flows, and sectoral performance.

Currency Implications: GBP/INR and Beyond

1. Stronger Indian Exports → INR Demand

As Indian exporters gain easier access to UK markets (with reduced tariffs), foreign buyers may increasingly pay in INR or demand favourable exchange. That could underpin the Rupee in some corridors, moderating the relative strength of GBP/INR.

2. UK Importers & Cost Pressures

British firms sourcing from India gain lower costs but must manage FX risk on INR payments. A weaker Rupee could help, but volatility remains a concern.

3. Investment Flows & Portfolio Currency Effects

Greater cross-border investment capital (into UK and India) may induce FX flows beyond trade. UK investors deploying capital in India, or Indian firms investing in Britain, will affect currency supply and demand.

4. Spillover to GBP/EUR & Global Pairs

Because India is a large trading partner but not a top global currency driver, much of the impact will be observed via GBP’s relative strength or weakness in global context — particularly GBP/USD and GBP/EUR. Shifts in confidence or capital flows from the FTA may influence how the Pound trades broadly.

Risks & Uncertainties to Watch

• Delay in ratification or implementation: Even though the deal is signed, full activation takes time and may be subject to political or regulatory delays.
• Non-tariff barriers remain: Regulatory divergence, customs friction, and licensing are often the hidden obstacles even with tariff reductions.
• Global macro shocks: FX markets may be distracted by major events (e.g. US Fed moves, geopolitical tensions) that overwhelm bilateral trade fundamentals.
• Currency speculation & short-term volatility: Traders may overreact to headlines around the Starmer visit or announcements, creating sharp but transient swings.

FX Strategy: How UK-India Traders Should Prepare

• Layer hedging: Use forward contracts to lock in favourable rates for long-term exposure, while leaving a portion unhedged for flexibility.
• Use limit/one-touch orders: Set target rates to capture beneficial intraday or event-driven moves around trade announcements.
• Diversify currency pairs: Rather than only focusing on GBP/INR, monitor GBP/USD, GBP/EUR, and USD/INR cross-plays for arbitrage or hedging.
• Cap volatility buffer: Maintain an FX buffer account or currency reserve to absorb temporary swings without forcing poor trades.
• Stay informed & agile: Monitor developments from the Starmer visit, regulatory announcements, and early trade data to adjust your position quickly.

Why Choose Indigo FX?

We are uniquely positioned to support UK-India traders:

• Direct access to live INR liquidity and multiple currency corridors
• Transparent pricing (no hidden markups)
• Tailored forward, option, and order-based strategies
• Real-time alerts and expert insights on market developments
• Dedicated account management so you stay ahead of trade policy shifts

When trade policy changes, currencies follow. When that happens, you need a partner you can rely on.

Conclusion

Starmer’s trip to Mumbai is more than diplomatic symbolism. It is a signal that the UK-India trade relationship is entering a new phase. As businesses respond to tariff cuts, investment flows, and regulatory shifts, currency markets will reflect those changes.

For UK firms engaged with India (or thinking about doing so), now is the time to prepare. Understand the trade dynamics, anticipate FX flows, and put in place a hedging strategy. With the right approach, you can turn policy momentum into financial advantage.

At Indigo FX, we help you map and execute your currency strategy through periods of change. Reach out to us to discuss how this trade wave can work in your favour.