By: Ashita Jain
In early May, India and the United Kingdom (UK) announced the conclusion of their free trade agreement (FTA), touted as the most comprehensive trade deal India has ever signed. While the full text of the agreement has yet to be released, it is clear that the digital trade chapter marks a notable development in India’s trade policy. Out of the 21 free or preferential trade agreements signed by India, only two — with Singapore and the United Arab Emirates — include a chapter on digital trade. However, both those chapters were either limited in scope or couched in non-binding language. By contrast, the India-UK FTA reflects a significant deepening of India’s digital commitments. The commitments, particularly on cross-border data flows, source code protection, and the prohibition of customs duties on electronic transmissions, will not only shape India’s digital governance trajectory but also influence its negotiations with the European Union (EU) and the United States.
The India-UK FTA seeks to open and stabilize the digital trade markets of the two countries and substantially reduce digital trade restrictiveness. It is likely that both parties have agreed to prohibit the imposition of customs duties on electronic transmissions. India has traditionally opposed the extension of the moratorium on customs duties on electronic transmission at the World Trade Organization (WTO), while the EU and the United States firmly support it. In fact, it forms a core provision in their digital trade chapters. Therefore, India’s precise commitment in the UK deal may serve as a bridge in ongoing negotiations with these partners.
Another key area is cross-border data flows and data localization. This remains among the most contentious topics in India’s digital trade negotiations. The India-UK agreement is understood to include provisions on cross-border data flows, with flexibility built in to allow for future renegotiation depending on India’s commitments on these issues with other FTA partners. Therefore, outcomes on negotiations with the EU and the United States are likely to influence the India-UK FTA.
Unlike India’s approach, the EU supports liberalized cross-border data flows (in accordance with the EU General Data Protection Regulation or GDPR). The report of the latest round of FTA negotiations between India and the EU — held in May 2025 — reveals cross-border data flows to be an outstanding element of the digital trade chapter. Meanwhile, the United States’ position on cross-border data flows, once a consistent and strongly pro-liberalization stance as reflected in its digital trade chapters across agreements like the United States-Mexico-Canada trade agreement and the U.S.–Japan Digital Trade Agreement, is evolving. This shift became evident when the United States withdrew its support for core digital trade provisions, such as protections for free data flows and prohibitions on data localization, during the WTO Joint Statement Initiative on Electronic Commerce negotiations in 2023. Nonetheless, the United States has expressed concerns over India’s data localization requirements. It has identified the Reserve Bank of India’s requirement for payment service providers to store data related to electronic payments by Indian citizens locally as a key trade barrier. It has also raised issues with the draft implementing rules under India’s Digital Personal Data Protection Act, which could restrict cross-border data transfers to specific countries and introduce sector-specific localization requirements.
The most remarkable aspect of the India-UK digital trade chapter is the inclusion of provisions protecting businesses from the forced transfer of source codes. This represents the first time India has agreed to such a commitment. It is a notable policy shift given that India’s 2019 draft national e-commerce policy had advocated retaining the ability to request source code disclosures to enable inter alia technology transfer. By contrast, both the United States and EU have long championed the protection of source code as a pillar of digital trade policy. The United States-Mexico-Canada trade agreement and the U.S.-Japan Digital Trade Agreement prohibit mandatory disclosure of source code, while allowing limited exceptions. However, the United States Trade Representative signaled in 2023 that it was reassessing its stance on source code and digital rules more broadly. For the EU, protection of source code is a core feature in its digital chapters. By agreeing to this provision with the UK, India offers a strong precedent and negotiating reference point for its ongoing discussions with both Washington and Brussels.
The India-UK FTA reflects a significant shift in India’s digital trade approach. The commitments it makes, particularly on customs duties on electronic transmissions, data flows, and source code protection, will serve as benchmarks in India’s ongoing negotiations with the EU and the United States. As such, the India-UK digital trade chapter may well shape the trajectory of India’s approach to digital trade in the years to come.
Ashita Jain is an Associate at the Centre for Trade and Investment Law, Indian Institute of Foreign Trade.