India and the UK have successfully concluded an India–UK free trade agreement (FTA) and a double contribution convention for social security after over three years of hard-nosed negotiations.
The finalisation of the India-UK FTA, sealed by Prime Ministers Narendra Modi and his UK counterpart Keir Starmer in a phone call on Tuesday, comes at a time when both countries are engaged with the Donald Trump government in the US to work out deals to avoid US reciprocal tariffs.
‘A historic milestone’
Announcing the FTA on X, Prime Minister Narendra Modi said: “Delighted to speak with my friend PM @Keir_Starmer. 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. These landmark agreements will further deepen our comprehensive strategic partnership, and catalyse trade, investment, growth, job creation and innovation in both our economies. I look forward to welcoming PM Starmer to India soon.”
India will benefit from tariff elimination on about 99 per cent of the tariff lines covering almost 100 per cent of the trade value, easing of mobility for professionals and a three-year exemption for temporary Indian workers from paying social security contributions in the UK, according to the Commerce Department. Bilateral trade of about $60 billion is projected to double by 2030.
On its part, India has agreed to halve tariffs on Scotch and gin to 75 per cent from 150 per cent before reducing to 40 per cent by year ten of the deal, while automotive tariffs will be slashed to 10 per cent from over 100 per cent under a quota.
“The FTA opens up massive export opportunities for labour-intensive sectors such as textiles, marine products, leather, footwear, sports goods and toys, gems and jewellery, and other important sectors such as engineering goods, auto parts and engines, and organic chemicals.,” per an official statement from the Indian government issued on Tuesday.
The services sector is expected to gain from easing of mobility for professionals including contractual service suppliers, business visitors, investors, intra-corporate transferees (ICTs), partners and dependent children of ICTs with right to work and independent professionals like yoga instructors, musicians and chefs, the statement added.
Trade push
The UK government said that the deal is expected to increase bilateral trade by £25.5 billion, UK GDP by £4.8 billion and wages by £2.2 billion each year in the long run.
“Indian tariffs will be slashed, locking in reductions on 90 per cent of tariff lines, with 85 per cent of these becoming fully tariff-free within a decade...Other goods with reduced tariffs, which can open markets and make trade cheaper for businesses and Indian consumers, include cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate and biscuits,” the UK statement added.
But the deal’s true test lies in how the UK’s Carbon Border Adjustment Mechanism (CBAM) is handled, pointed out Ajay Srivastava from the Global Trade Research Initiative (GTRI). “If Indian exports still face CBAM levies while UK goods enter India duty-free, it risks turning a balanced FTA into a one-sided bargain. Let’s hope this elephant in the room wasn’t ignored,” Srivastava said.