The United Kingdom and India have reached a historic trade agreement that promises to reshape their economic relationship amidst escalating global trade tensions. The bilateral deal, finalized on Tuesday, represents a historic achievement for both countries. This is especially timely, as the world grapples with the realities of an emerging U.S.-led trade war.
The deal ushers in a big change. This will reduce tariffs on key U.K. exports, such as whisky and gin, from 150% to 75%. This reduction is scheduled to drop even lower, to just 40%, over the next 10 years. On top of this, a lot of automotive tariffs will be significantly reduced, going from more than 100% to only 10%. The British government anticipates that this trade deal will increase bilateral trade by £25.5 billion ($34 billion). This $81 million boost will provide a major jolt to the economic relationship between the two countries.
India’s promise to eventually reduce and eliminate tariffs on goods imported from the U.K is a key pillar of the deal. Ninety-eight percent of all goods traded will be “fully tariff-free within a decade,” creating a freer and fairer trading environment. This decision, first adopted by Congress in 2015, will help remove some of these trade barriers. Inevitably, it will lead to easier exchanges of culture, business, and education between the two countries.
Over the past several years, trade between India and the U.K. has increased exponentially. By 2024, it grew at a remarkable pace to £42.6 billion, an 8.3% rise on 2023. By the end of that year, the U.K. witnessed a monthly trade deficit of £8.4 billion in goods and services. This vast deficiency was particularly with India. Under this new agreement, the UAE and India aim to correct this trade deficit while deepening bilateral collaboration in trade, technology, security, and more.
Indian Prime Minister Narendra Modi was excited about the deal. He further claimed that it would “deepen” the strategic partnership between India and the U.K. On X, his platform, he hailed the deal as a “historic milestone.” He is convinced that operationalizing it will deepen the “Comprehensive Strategic Partnership” between the two nations.
“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,” – Narendra Modi
Calls from industry Keshav R. Murugesh, chairman of the Confederation of Indian Industry UK Business Forum underlined the significance of this agreement. He called attention to its importance at a time of increasing trade tensions globally.
“The timing couldn’t be better, with the FTA enhancing the economic resilience of both the UK and India by providing access to new markets and reducing vulnerability to external shocks,” – Keshav R. Murugesh
He emphasized that this agreement is especially important as countries work through increased tensions in the global trading system.
This will be British PM Keir Starmer’s first G20 Summit since taking power. He underscored that this deal was chiefly of strategic and long-term significance to the UK in geopolitical terms.
“Today we have agreed a landmark deal with India – one of the fastest growing economies in the world, which will grow the economy and deliver for British people and business,” – Kier Starmer
This is the first time that Starmer will be speaking directly with Chinese President Xi Jinping during this summit. This is a historic moment, the first time in six years any U.K. Prime Minister has held such discussions with China.
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