UK and India Seal Landmark Trade Deal After Three Years of Negotiations

The United Kingdom and India have officially concluded a landmark bilateral trade agreement after three years of negotiations, marking one of the most significant post-Brexit trade milestones for Britain. The deal is aimed at boosting exports, slashing tariffs, and opening new economic opportunities for both nations.

Under the new agreement, UK companies will find it easier to export goods such as whisky, gin, premium cars, aerospace parts, cosmetics, electricals, and food products, including lamb, salmon, chocolates, and biscuits, to the rapidly growing Indian market. In return, Indian exporters will benefit from reduced tariffs on products like clothing, footwear, jewellery, gems, and foodstuffs, including frozen prawns.

The UK government has called it the “biggest and most economically significant” trade deal since it exited the European Union in 2020. It is expected to increase annual bilateral trade by an estimated £25.5 billion by 2040, on top of the £42.6 billion worth of trade recorded in 2023.

Prime Minister Sir Keir Starmer hailed the agreement as a major step forward, saying it would “deliver for British people and businesses” and fuel economic growth. Meanwhile, Indian Prime Minister Narendra Modi described the deal as a “historic milestone” that would catalyse trade, investment, innovation, and job creation in both economies.

The deal, however, does not include any changes to immigration policies, including provisions for Indian students in the UK—a sticking point in earlier talks.

One of the most notable elements of the agreement is the reduction of tariffs:

• UK whisky and gin tariffs will be halved to 75 per cent initially, with gradual reductions to follow.
• Luxury British cars currently facing a 100 per cent import duty in India will see tariffs slashed to 10 per cent, though the number of vehicles allowed will be subject to a quota.
• Clothing, footwear, and jewellery from India will enter the UK at lower duties, benefitting British consumers.
• UK-made aerospace parts, medical devices, and cosmetics will have easier market access.

The agreement also contains significant provisions for services and procurement, allowing British firms to bid for more Indian government contracts. Additionally, workers temporarily transferred between the two countries will receive a three-year exemption from paying social security contributions in the host country. This means employers and employees will only pay into their domestic systems, a benefit the Indian government termed an “unprecedented achievement.”

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The UK already has similar arrangements with 17 countries, including the US, EU nations, and South Korea. The British government clarified that this exemption will not affect funding for the National Health Service (NHS), as Indian workers in the UK will still pay the immigration health surcharge.

Despite the broad support from business groups, the deal has sparked criticism from opposition parties. Conservative opposition leader Kemi Badenoch referred to it as “two-tier taxes from two-tier Keir,” pointing to Labour's recent hike in employer National Insurance contributions. Shadow Trade Secretary Andrew Griffith added, “Every time Labour negotiates, Britain loses.”

Liberal Democrat Deputy Leader Daisy Cooper voiced concerns about tax implications for Indian workers in the UK and urged that MPs be allowed a vote on the deal.

The Confederation of British Industry (CBI) welcomed the deal, calling it a “beacon of hope amidst the spectre of protectionism,” especially in the wake of former US President Donald Trump's wave of global tariffs.

Allie Renison, a former UK government trade adviser, said the pact could be "transformational" due to India's economic growth and historically high trade barriers.

India, now the world's fifth-largest economy, is projected to become the third-largest within a few years. The UK, currently sixth, sees India as a strategic partner in diversifying its trade post-Brexit. For India, the deal aligns with its national target of reaching $1 trillion in exports by 2030.

Though the agreement may take up to a year to come into force, it is poised to reshape trade ties between the two nations and send a strong message in favour of free trade during a time of increasing global protectionism.