India, United Kingdom seal free trade deal; Prime Minister Mr. Narendra Modi calls it 'historic milestone'

India and the United Kingdom (UK) have concluded negotiations on a comprehensive Free Trade Agreement (FTA) after nearly three and a half years, marking a significant milestone in strategic and economic ties between the two economies. The FTA, once implemented, will eliminate UK tariffs on approximately 99% of Indian goods, significantly enhancing export competitiveness in key sectors such as textiles, toys, leather, marine products, gems & jewellery, and footwear. Simultaneously, India will reduce import duties on 90% of UK goods, with 85% becoming fully duty-free within 10 years. Key concessions include reductions in tariffs on whisky and gin from 150% to 75% and further to 40% by year 10, along with quota-based tariff cuts on automobiles (from over 100% to 10%). Tariff relief has also been extended to electrical machinery, cosmetics, medical devices, soft drinks, and chocolates. Sensitive sectors such as dairy, apples, and cheese have been excluded to protect Indian farmers.
A major win for India is the conclusion of a Social Security Agreement, granting a three-year exemption from UK social security contributions for Indian skilled professionals. This long-standing demand is expected to benefit over 60,000 Information Technology (IT) workers, resulting in savings of around 20% of employee salaries—amounting to over Rs. 4,000 crore (US$ 473.09 million). The deal also promises improved mobility for service professionals and greater market access in IT-enabled services, finance, education, and business services. While the Bilateral Investment Treaty (BIT) remains unresolved due to disagreements on dispute resolution timelines and tax inclusion, the FTA sets a new benchmark in India’s trade diplomacy. In FY23, bilateral trade stood at Rs. 1,80,345 crore (US$ 21.33 billion), with Indian exports rising 13.3% to Rs. 1,09,069 crore (US$ 12.9 billion) and imports falling 6.1% to Rs. 71,022 crore (US$ 8.4 billion). The pact aligns with India’s broader objective of integrating deeper into global value chains while safeguarding domestic interests.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.