India has reached a long-coveted free trade pact with the UK on Tuesday after tariff turmoil sparked by US President Donald Trump forced the two sides to hasten efforts to increase their trade in whisky, cars and food.
The deal, between the world’s fifth and sixth-largest economies, has been concluded after three years of stop-start negotiations and aims to increase bilateral trade by a further £25.5 billion ($34 billion) by 2040 with liberal market access and eased trade restrictions.
Under the deal, 99 per cent of Indian exports will benefit from zero duty access to the UK market, opening up opportunities for labour intensive sectors such as textile, marine products, leather, footwear, sports goods, toys and gems and jewellery.
In India, connoisseurs of Scotch whisky and gin may see the price of their coveted brands falling significantly as tariffs will be halved from 150 per cent to 75 per cent before reducing to 40 per cent by the deal’s 10th year. Automotive tariffs will also go from over 100 per cent to 10 per cent under a quota.
Prime Minister Narendra Modi described the development as ‘landmark’ and ‘mutually beneficial’.
“In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial free trade agreement, along with a double convention agreement’, adding that it would catalyse trade, investment, growth, job creation and innovation.
British Prime Minister Keir Starmer said, “Today we have agreed on a landmark deal with India — one of the fastest growing economies in the world, which will grow the economy and deliver for British people and business.”
The two leaders had a phone call where Modi invited Starmer to India. The FTA will now go through the process of legal text formalisation to be approved by the British Parliament before it comes into force.
The deal will allow more British firms to compete for contracts in India, and enable Indian workers to travel to Britain for work, without changing Britain’s points-based immigration system.
According to the UK Department for Business and Trade (DBT), besides whisky and gin, tariff reductions have also been achieved on products such as medical devices, advanced machinery and lamb.
Based on 2022 trade statistics, the department claims this amounts to India cutting tariffs worth over £400 million when the deal comes into force, which will more than double to £900 million after 10 years.
The pact marks India opening up its long-guarded markets, including automobiles, setting an early example for the South Asian nation’s likely approach to dealing with major Western powers such as the US and the European Union.
Both countries are also seeking bilateral deals with the United States to remove some of Trump’s tariffs that have upended the global trade system, and the resulting turmoil sharpened focus in both London and New Delhi on the need to clinch a UK-India trade deal. It also marks Britain’s most significant trade deal since it left the European Union in 2020.
Stop-start negotiations
Talks over a free trade deal between India and Britain were initially launched in January 2022, and became a symbol of Britain’s hopes for its independent trade policy after Brexit. But negotiations were stop-start, with Britain having four different prime ministers since that launch date and elections in both countries last year.
Britain’s Labour Party, elected last July, moved rapidly to conclude a deal after restarting talks in February, with last-minute talks between the countries’ trade ministers in London last week enough to clinch a deal.
With inputs from Reuters and PTI
