INDIA AND THE United Kingdom ironed out major differences during the latest round of talks in April end at London and announced Tuesday the conclusion of the long-awaited Free Trade Agreement.
Prime Minister Narendra Modi described the deal as a “historic milestone” and UK Prime Minister Keir Starmer termed it a “landmark trade deal”. Both said it would create jobs, enhance bilateral trade, and bring investment into their countries.
Amid fears of potential fresh tariffs under US President Donald Trump and a renewed global push for deal-making, the UK trade agreement is the first among many India is currently negotiating with including the US, the European Union, Chile, and Peru.
Once the deal comes into effect, the UK tariffs on footwear, textiles, automobile components, electrical machinery, minerals, and base metals — currently in the 2-18 per cent range — will be eliminated. This will help boost several labour-intensive sectors, the Commerce and Industry Ministry said. To protect its farmers India had excluded sensitive items such as dairy products, apples, cheese, etc from any duty concessions.
India, on its part, has agreed to cut tariffs on whiskey and gin to 75 per cent from 150 per cent, and further to 40 per cent over 10 years. It will also slash automotive tariffs to 10 per cent from 100 per cent to 10 per cent under a quota, the UK said in a statement.
Indian tariffs on cosmetics, aerospace products, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate, and biscuits would also be reduced, opening the market further to UK exporters, the UK government said.
The textile and footwear industry said the duty elimination would boost exports and job creation. The alcohol beverage industry, however, said the government has not fully heeded to the pleas of the beverage industry and feared similar agreements with the US and EU that would adversely impact the Indian alcohol beverage industry.
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Announcing the deal, Prime Minister Modi said, “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 for both our economies.”
UK Prime Minister Starmer said Britain has agreed to a “landmark trade deal” with India. “Fantastic news for British business, British workers, and British shoppers, delivering on our Plan for Change. Good to speak to Prime Minister @NarendraModi as we mark this historic moment,” he said.
Under the Double Contribution Convention, skilled Indian workers employed in the UK and their employers will be exempted from paying social security contributions for three years, a longstanding India demand. Nasscom said this will not only enhance the access of Indian talent in the UK, but also create new opportunities for skilled professionals, enabling them to contribute meaningfully to the UK’s dynamic economy.
“The provision reflects the recognition of India’s strength in delivering high-quality services globally and reinforces the importance of mobility for Indian professionals in driving innovation and growth,” it said.
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In New Delhi, the PMO said the two leaders agreed to expand economic and commercial ties between India and the UK. “The conclusion of a balanced, equitable and ambitious FTA — covering trade in goods and services — is expected to significantly enhance bilateral trade, generate new avenues for employment, raise living standards, and improve the overall well-being of citizens in both countries,” the PMO said.
In a statement, the UK government said the India–UK deal is a major economic win for the UK, delivering benefits for working people and British businesses. “Through pragmatism and purpose, the leaders noted that this historic deal is the biggest the UK has concluded since leaving the EU, and the most ambitious India has ever undertaken. Prime Minister Modi also thanked the Prime Minister for his decisive leadership in getting the deal over the line,” the UK statement read.
The deal follows a series of high-level visits to the UK in April, including those by Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal. India and the UK are also expected to finalise the Bilateral Investment Treaty (BIT) alongside the FTA.
India’s labour-intensive sectors are expected to benefit significantly from the India-UK FTA, especially the textile industry. Indian textile exports currently face tariffs of up to 10 per cent in the UK, and the trade deal could place India on a more level playing field with competitors such as Bangladesh, thereby boosting exports. Meanwhile, deeper integration in the services sector with the UK could create more jobs in this fast-growing area.
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The UK’s carbon tax has been a concern for India, as it could restrict Indian exports of metal products. The Indian Express earlier reported that with the UK unwilling to offer concessions under its Carbon Border Adjustment Mechanism (CBAM), India has proposed a ‘rebalancing mechanism’ — a measure that would require the UK to compensate Indian industry for losses incurred due to the regulation. Agreement on rules of origin and short-term service visas were among the final sticking points as negotiations entered final stages in April end.
