On Tuesday, the Prime Ministers of India and the United Kingdom declared that both countries have finalized a free trade agreement. Prime Minister Narendra Modi, in a social media update, expressed his approval of the successful finalization of the India–UK Free Trade Agreement and the Double Contribution Convention.
“Prime Minister Shri Narendra Modi and Prime Minister of the United Kingdom H.E. Sir Keir Starmer had a telephone conversation today. The two leaders welcomed the successful conclusion of an ambitious and mutually beneficial India–UK Free Trade Agreement along with the Double Contribution Convention,” a statement released by the government said.
The UK Prime Minister, Keir Starmer, responded to the trademark deal signing by stating that enhancing partnerships and lowering trade obstacles with global economies is integral to their Plan for Change aimed at achieving a more robust and secure economy.
“Delighted to speak with my friend PM Keir Starmer. 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. These landmark agreements will further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies,” PM Modi said in a post on X.
He also invited his English counterpart to India for a visit. “I look forward to welcoming PM Starmer to India soon,” he said.
In 2023-24, bilateral trade between India and the United Kingdom increased to USD 21.34 billion, rising from USD 20.36 billion in the prior year. At present, products brought in from India to the UK face an average tariff of 4.2 percent.
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How Will The Trade Agreement Work?
As per the economic think tank GTRI, the newly established trade agreement is anticipated to favor numerous Indian exports, which include textiles, garments like shirts, trousers, and dresses, along with bed linens, shoes, carpets, cars, seafood, grapes, and mangoes, all of which presently encounter low to moderate import tariffs in the UK market.
In FTAs, two nations either remove or greatly lower tariffs on the majority of goods exchanged between them. They also simplify regulations to enhance trade in services and bilateral investments.
Tarrifs on products like lamb, salmon, chocolates, cookies, and whiskey will decline significantly. The agreement also ensures quotas for each country regarding the importation of cars and components.
In a major shift in its policy, New Delhi has granted greater market access to UK companies, particularly in the automotive industry. This could indicate a change in trend since India is currently negotiating with the United States and the European Union for comparable trade agreements.
India holds the title of the largest whiskey market globally, and under this agreement, tariffs on whisky and gin will be reduced from 150 percent to 75 percent. They will drop to 40 percent by the tenth year of the agreement.
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As part of the agreement, India has committed to reducing tariffs on 90 percent of British goods sold within its borders, including medical devices and machinery, with 85 percent of these becoming duty-free over the next ten years. The automotive sector will experience a significant reduction in tariffs, dropping from the existing 100 percent to just 10 percent.
Other sectors that will benefit significantly from the trade agreement include cosmetics, aerospace, electrical machinery, and soft drinks.
