The UK and India agreed today on a landmark free trade deal, which is expected to increase bilateral trade by £25.5 billion ($34 billion), the UK’s GDP by $6.43 billion, and wages by $2.94 billion each year in the long run. The deal comes as U.S. President Donald Trump’s tariffs forced the two nations to bolster efforts to increase their trade of key products.
The deal between the world’s fifth and sixth-largest economies was concluded after three years of negotiations. Business and Trade Secretary Jonathan Reynolds and Indian Commerce Minister Piyush Goyal held final talks in London last week after relaunching negotiations only two months ago.
Negotiators across both sides have worked around the clock since February to get this deal done, which is the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU, and the best deal India has ever agreed.
UK to reduce tariffs on key Indian goods
The UK government said today in a statement that Indian tariffs will be slashed, locking in reductions on 90 percent of tariff lines, with 85 percent of these becoming fully tariff-free within a decade. Whisky and gin tariffs will be halved from 150 percent to 75 percent before reducing to 40 percent by year ten of the deal, while automotive tariffs will go from over 100 percent to 10 percent under a quota.
Other goods with reduced tariffs, which can open markets and make trade cheaper for businesses and Indian consumers, 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 liberalizes tariffs,” added the statement.
Commenting on the free trade deal, UK 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. ”
India to cut tariffs worth over $535.44 million
UK businesses will also gain a competitive edge over international competitors when entering India’s enormous market as it gets even bigger, forecasted to become the 3rd largest global economy within three years.
“Strengthening our alliances and reducing trade barriers with economies around the world is part of our Plan for Change to deliver a stronger and more secure economy here at home,” added Starmer.
Barriers to trade will be dropped, with India agreeing to reduce tariffs on a host of UK products, including whisky, medical devices, advanced machinery and lamb, making UK exports more competitive. Based on 2022 trade alone, this amounts to India cutting tariffs worth over $535.44 million when the deal comes into force, which will more than double to around $1.2 billion after 10 years.
“It matters when the fifth and sixth largest economies in the world reach a trade agreement. Such an agreement is illustrative of the positive momentum in the UK-India relationship, the commitment and ambition of both governments, and the opportunities for greater trade, investment and collaboration between our countries,” commented Richard Heald, OBE, UK-India Business Council Chair.
UK, India to establish streamlined portal for trade
Exporting to the Indian market will also be easier than ever before thanks to India agreeing to release goods as quickly as possible after arrival at customs, work with the UK on one streamlined portal for trade and publish customs procedures and laws online in English.
In addition, new digital commitments will support electronic contracts and transactions. These changes could particularly support small and medium-sized businesses, making it easier for them to enter the Indian market.
