India and the United Kingdom have signed a comprehensive free trade agreement (FTA) during Indian Prime Minister Narendra Modi’s visit to the UK.
The pact, which marks the conclusion of over three years of on-and-off negotiations, is expected to significantly reduce tariffs on a wide range of goods—from Scotch whisky and automobiles to Indian textiles and seafood—while opening up greater market access for businesses on both sides.
This is the UK’s most significant trade deal since its exit from the European Union in 2020 and represents India’s most ambitious partnership with an advanced economy to date. The agreement is projected to boost bilateral trade by £25.5 billion (approximately $34 billion) by 2040.
Key Trade Benefits
Under the deal, the UK will see tariff reductions on 90% of its exports to India. Tariffs on Scotch whisky, currently at 150%, will immediately drop to 75% and reduce further to 40% over a ten-year period. Similar duty cuts are set for other spirits like brandy and rum. For the automotive sector, Indian duties on British-made vehicles—currently as high as 110%—will reduce to 10% within five years under a gradually expanding quota system.
Indian businesses will benefit significantly from the agreement as 99% of Indian exports to the UK—especially textiles, jewelry, and seafood—will now enter tariff-free. Indian electric and hybrid vehicle manufacturers will also be granted market access to the UK under a separate quota system.
The average tariff faced by UK exporters in India will fall from 15% to just 3%, making trade more affordable and efficient.
Strategic and Economic Impact
Prime Minister Modi hailed the agreement as “a blueprint for our shared prosperity,” underscoring the expanded access for Indian products in the British market. At Chequers, British Prime Minister Keir Starmer emphasized the mutual gains, describing the deal as a milestone that will make trade “cheaper, quicker, and easier” and signal a new era of global economic engagement.
The trade deal is expected to add £4.8 billion annually to the UK’s economy by 2040, although this remains modest in comparison to the economic losses attributed to Brexit. Nevertheless, it strengthens the UK’s post-Brexit global trade strategy and signals a reset in its approach to major international partnerships.
Beyond Trade: Defence, Climate, and Social Security
Apart from trade in goods and services, the agreement includes cooperation on defence, climate change, and law enforcement. A major breakthrough is the removal of dual social security contributions for professionals temporarily posted between the two nations—easing the burden on cross-border workers.
While the deal facilitates easier movement for business professionals, it does not include new visa arrangements. The UK has also maintained its stance on the Carbon Border Adjustment Mechanism, meaning Indian exports may still face higher tariffs from 2027 unless they meet strict environmental standards.
A Signal to the Global Market
Commerce and Industry Minister Piyush Goyal, who was instrumental in the final stages of negotiation, said that the ability to navigate sensitive issues without derailing the deal reflects a matured bilateral understanding. He added that the agreement sends a strong signal to other global partners, including the EU and the United States, about India’s seriousness in pursuing deep economic ties with developed economies.
“This agreement may not serve as a direct blueprint for future deals,” Goyal noted, “but it clearly demonstrates India’s capacity and commitment to meaningful engagement with the global trade system.”
The FTA is now subject to ratification in both countries and is expected to come into force within a year.
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