India and UK Forge Historic Free Trade Agreement: What It Means for Both Economies

A New Era of Trade Between India and the UK

New Delhi: On Tuesday, India and the United Kingdom finalized a significant free trade agreement (FTA) aimed at reducing tariffs on 99% of Indian exports. This agreement will also facilitate British exports of whisky, automobiles, and other goods to India, enhancing the overall trade relationship.

This FTA, the largest the UK has negotiated since its exit from the European Union, was accompanied by a double contribution convention.

Prime Minister Narendra Modi hailed the agreements as a "historic milestone" that will stimulate trade, investment, and job creation in both nations, further strengthening the India-UK strategic partnership.

The FTA, which followed a discussion between Modi and UK Prime Minister Keir Starmer, is expected to provide zero-duty benefits for 99% of Indian exports and improve mobility for professionals, including business visitors and investors.

"In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention," Modi stated on social media.

He emphasized that these agreements would deepen the Comprehensive Strategic Partnership and foster trade, investment, growth, job creation, and innovation in both economies.

After three years of negotiations, the trade deal guarantees comprehensive market access for Indian products across all sectors, with India benefiting from tariff eliminations on nearly all product categories.

According to a British statement, Indian tariffs will be significantly reduced, with 90% of tariff lines locked in and 85% becoming fully tariff-free within a decade.

Tariffs on whisky and gin will be cut from 150% to 75%, eventually decreasing to 40% by the tenth year of the agreement, while automotive tariffs will drop from over 100% to 10% under a quota system.

Other products, including cosmetics, aerospace items, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate, and biscuits, will also see reduced tariffs, making trade more affordable for businesses and consumers in India.

British consumers can expect lower prices and a wider selection of goods, including clothing, footwear, and food items like frozen prawns, as the UK liberalizes its tariffs.

The deal is projected to boost bilateral trade by £25.5 billion, increase UK GDP by £4.8 billion, and raise wages by £2.2 billion annually in the long term.

The Indian government noted that the FTA ensures extensive market access for goods across all sectors, aligning with India's export interests.

"India stands to gain from the elimination of tariffs on approximately 99% of tariff lines, covering nearly all trade values, presenting significant opportunities for enhanced bilateral trade with the UK," the statement added.

The FTA is expected to positively impact India's manufacturing sectors, particularly those that are labor and technology-intensive, and will open up export opportunities in textiles, marine products, leather, footwear, sports goods, toys, gems and jewelry, engineering goods, auto parts, and organic chemicals.

The agreement will also simplify the process for British companies to export whisky, cars, and other products to India.

Additionally, it will facilitate the movement of professionals, including contractual service suppliers, business visitors, investors, intra-corporate transferees, and their dependents, allowing them the right to work.

Independent professionals such as yoga instructors, musicians, and chefs will also benefit from easier mobility.

"India has ensured that non-tariff barriers are effectively addressed to facilitate the free flow of goods and services, preventing unjustified restrictions on exports," the statement noted.

"The FTA aims to promote good regulatory practices and enhance transparency, aligning with India's focus on domestic reforms to improve the ease of doing business," it added.

The conclusion of this "balanced, equitable, and ambitious" FTA, which encompasses trade in goods and services, is anticipated to significantly boost bilateral trade, create new employment opportunities, elevate living standards, and enhance the overall well-being of citizens in both nations, according to the Prime Minister's Office.

"It will also unlock new potential for the two countries to collaboratively develop products and services for global markets," it stated.

"Both leaders agreed that these landmark agreements between two major open market economies will create new business opportunities, strengthen economic ties, and deepen people-to-people connections," the statement concluded.

Starmer emphasized that strengthening alliances and reducing trade barriers globally is part of the strategy for a stronger and more secure economy.

The British Prime Minister's office indicated that the deal will contribute billions to the UK economy, increase wages, and fulfill the government's plan for change.

"In a significant economic victory for the UK, benefiting working individuals and British businesses, the Prime Minister highlighted the need for further action to secure and renew the nation," it stated.

"Through pragmatism and purpose, the leaders acknowledged that this historic deal is the largest the UK has negotiated since leaving the EU and the most ambitious agreement India has ever entered into," it added.

Modi expressed gratitude to Starmer for his decisive leadership in finalizing the deal.

During their phone conversation, Modi mentioned his eagerness to welcome Starmer to India in the near future.