Government signs landmark billion-pound trade deal with India
Billions of pounds in extra trade could soon flow between India and the UK after the two nations signed a landmark free trade agreement, ending years of protracted negotiations.
The deal, which the UK government said was the most “economically significant” free trade agreement signed since Brexit and the “best deal India has ever agreed”, is projected to be worth as much as £25.5bn in bilateral trade, adding £4.8bn to the UK economy.
But the terms of the deal, which is yet to be ratified by Parliament, have already drawn criticism from opposition figures, who raised questions over the preferential employment tax treatment afforded to Indian nationals working in the UK.
The agreement will see a significant lowering of tariffs imposed by India on the UK, which the government said would “lock in” in reductions on 90 per cent of tariff lines, of which as much as 85 per cent become fully tariff-free within ten years. That would amount to India cutting tariffs worth £400m per year once the deal becomes law, and as much as £900m within a decade.
Whisky and gin tariffs will be halved from 150 per cent to 75 per cent, while automotive tariffs will be slashed from over 100 per to 10 per cent but will remain subject to a quota. The UK would also lower some tariffs it imposes on India including in areas like textiles.
The government said British shoppers could see cheaper prices and more choice on products including clothes, footwear, and food products — though the deal did not include certain types of food, such as dairy products and rice.
Ben Ramanauskas, senior research fellow in economics at Policy Exchange and a former government trade adviser, told City AM the deal “has the potential to be very significant economically due to India’s high tariffs.
“The Government should be commended on their efforts to finally get the deal over the line. It shows that countries still recognise the benefits of free trade and so the government should continue to negotiate deals with as many countries as possible.”
The agreement was understood to have stalled over differences on relaxing visa rules, though a breakthrough was reached after the UK made a key concession in exempting Indian migrants from paying national insurance, a move which sparked fury from some in opposition.
Shadow business secretary Andrew Griffith said: “Desperate for a positive headline, Keir Starmer has just signed a deal which exempts Indian workers transferred to the UK from paying national insurance …after increasing it for British workers. Every time Keir Starmer negotiates, Britain loses.”
Indian Prime Minister Nerendra Modi said: “In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement.”
Modi added that the deal would “catalyse trade, investment, growth, job creation and innovation in both our economies.”
Prime Minister Keir Starmer said: “We are now in a new era for trade and the economy. That means going further and faster to strengthen the UK’s economy, putting more money in working people’s pockets.”
The UK is already a major trading partner with India, with as much as £7bn in British exports to the country in 2024, though that remains lower than India’s £10bn exports to the UK.