India, UK Conclude Free Trade Agreement, Announces PM Modi

India and the United Kingdom have concluded the free trade agreement, which was under negotiation since January 2022, according to an announcement made by Prime Minister Narendra Modi on Tuesday.

"In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention," Modi said after a telephonic conversation with his UK counterpart, Keir Starmer.

"These landmark agreements will further deepen our Comprehensive Strategic Partnership and catalyse trade, investment, growth, job creation, and innovation in both our economies. I look forward to welcoming PM Starmer to India soon," he added.

Starmer, during the conversation with Modi, said that strengthening alliances and reducing trade barriers with economies around the world is part of "their plan for change" to deliver a stronger and more secure economy, as per a release issued by the Indian Prime Minister's Office.

The two leaders agreed that expanding economic and commercial ties between India and the UK remains a "cornerstone of the increasingly robust and multifaceted partnership", the PMO said.

The conclusion of a balanced, equitable and ambitious FTA, covering trade in goods and services, is expected to significantly enhance bilateral trade, generate new avenues for employment, raise living standards, and improve the overall well-being of citizens in both countries, it further said.

The pact will also unlock new potential for the two nations to jointly develop products and services for global markets, the PMO said. "This agreement cements the strong foundations of the India-UK Comprehensive Strategic Partnership and paves the way for a new era of collaboration and prosperity."

Commerce Secretary Sunil Barthwal added that this FTA is "the most comprehensive free trade deal ever entered into by India and will be the gold standard for our future engagements."

The biggest takeaway for Indian exporters is the tariff elimination on about 99% tariff lines, which cover almost 100% of the trade value. There will be real gains for Indian sectors like textiles, footwear, carpets, cars, and marine products—all currently facing UK tariffs of 4–16%.

Export opportunities also now open up for labour-intensive sectors such as textiles, marine products, leather, footwear, sports goods and toys, gems and jewellery, and other important sectors such as engineering goods, auto parts and engines, and organic chemicals.

India also stands to benefit in services such as IT/ITeS, financial services, professional services, other business services and educational services.

The deal also eases mobility for Indian professionals including contractual service suppliers, business visitors, investors, intra-corporate transferees and their families and independent professionals like yoga instructors, musicians and chefs

Further, India has secured significant commitments on digitally delivered services for Indian service suppliers, specially in professional services such as architecture and engineering, computer related services and telecommunication services.

The deal also promises "immense opportunities for talented and skilled Indian uth will open up in the UK which is a major global centre for digitally delivered services due to its strong financial and professional services sectors and advanced digital infrastructure."

Under the Double Contribution Convention Agreement, dubbed as the social security agreement, exemptions have been secured for Indian workers who are temporarily in the UK and their employers from paying social security contributions in the UK for a period of three years.

In response to the 99% cuts, India has also reciprocated, slashing tariffs on key UK products such as whisky, cosmetics and medical devices. Reductions have been locked in on 90% of tariff lines, with 85% of these becoming fully tariff-free within a decade.

Alcohol, which is a major commodity for the countries' trade, will see a cut. Whisky and gin tariffs will be halved from 150% to 75% before reducing to 40% by the tenth year of the deal.

Automotive tariffs will go from over 100% to 10% under a quota, while other goods with reduced tariffs include cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate and biscuits.

"British shoppers could see cheaper prices and more choice on products including clothes, footwear, and food products including frozen prawns as the UK liberalises tariffs," the UK's Department for Business and Trade said in a statement.

Further, the UK predicts to increase bilateral trade by £25.5 billion, its GDP by £4.8 billion and wages by £2.2 billion each year in the long run as the trade deal becomes operational.

Overall, India is cutting tariffs worth over £400 million when the deal comes into force, which will more than double to around £900 million after 10 years, in a big win for the UK.