UK and India reach historic free trade agreement boosting economic ties with billions in growth

The United Kingdom and India have officially signed a landmark free trade agreement, representing the most significant trade deal for Britain since its departure from the European Union. The newly minted agreement is expected to inject up to £5 billion annually into the UK economy and elevate gross domestic product by 0.1 per cent. This marks a major step forward for both nations in strengthening their economic and strategic relations.

Under the terms of the deal, tariffs on key British exports such as whisky and cars will be reduced by as much as 90 per cent. This will deliver substantial economic benefits to British industries while creating wider opportunities for growth. India has also secured significant concessions, including the removal of tariffs on its textile exports to the UK, which will lower costs for British consumers and benefit Indian manufacturers.

The agreement includes a phased reduction in tariffs. For example, whisky tariffs currently as high as 150 per cent will drop to 75 per cent immediately and then further decrease to 40 per cent within ten years. Automotive tariffs, currently over 100 per cent, will fall dramatically to 10 per cent under the new quota system. Additional reductions in taxes on exports such as medical devices and aircraft parts are anticipated to foster unprecedented market access for British companies in the highly protectionist Indian economy.

The deal, hailed by UK Labour Party leader Sir Keir Starmer as a “historic milestone,” is projected to increase trade between Britain and India by nearly 50 per cent. Over the long term, wages in the UK are expected to grow by £2.2 billion, further benefiting workers and companies alike. Economists suggest the agreement will act as a much-needed economic stimulus in the post-Brexit landscape and shield the UK from some of the adverse effects of ongoing global trade tensions.

India has also achieved a key diplomatic victory, with the UK agreeing to waive national insurance contributions for Indian workers sent to Britain on business trips. This issue had long been a source of contention during the negotiations. The arrangement is expected to smooth the process for Indian professionals and encourage greater collaboration between the two economies.

Although the agreement reflects substantial progress, it comes after years of protracted negotiations and political complexities. The discussions, which began in early 2022, faced significant roadblocks on tariff reductions and migration policies. However, recent efforts by business secretary Jonathan Reynolds and counterparts in India’s trade ministry helped the two nations reach a consensus. Both sides view the agreement as a transformative moment that will deepen economic, political, and cultural ties over the coming decades.

Mark Kent, the chief executive of the Scotch Whisky Association, described the deal as “transformational” and a once-in-a-generation opportunity to expand exports to India, the world’s largest market for whisky. It is also expected that the deal’s provisions, which include liberalised customs processes and streamlined rules of origin, will significantly simplify trade logistics for businesses in both countries.

The UK government has described the agreement as a standout development amid efforts to establish new trade relationships globally. Ministers are optimistic that it will serve as a springboard for further economic collaborations, including potential enhanced partnerships with the European Union and the United States. Both these relationships remain pivotal for the UK’s post-Brexit economic strategy.