India, UK seal ‘landmark’ FTA

Capping three years of negotiations, India and the UK on Tuesday agreed on a landmark trade deal which Prime Minister Narendra Modi described as a “historic milestone”.

Modi announced the conclusion of the India-UK free trade agreement (FTA) after a phone call with his British counterpart Keir Starmer, who will travel to India later this year to formally sign the deal that could take a year to come into force. The FTA comes at a time when US President Donald Trump’s tariff policy has forced countries to recalibrate trade ties.

The UK, under the FTA, will reduce tariffs across 99 per cent Indian product lines, with massive benefits for textile, footwear and food product sectors. An Indian official statement said 99 per cent of the exports would face zero duty in the UK market. “The FTA opens up massive export opportunities 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,” it said.

India eyes job boom

For the UK, the deal comes at a time when US President Donald Trump’s tariffs are threatening local business and jobs.

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For India, it would serve in advancing the goal of reaching annual exports to USD 1 trillion by 2030.

India’s total exports (including goods and services) for FY 2024-25 were $820.93 billion.

With UK tariffs across labour intensive sectors to be cut, jobs at home will also boom.

As part of the deal, India and the UK will sign a double contribution convention, meaning Indians temporarily working in the UK wouldn’t have to pay national insurance contributions for three years. The same benefit will extend to British workers in India. PM Modi specially mentioned this part of the deal, saying it would make Indian service providers significantly more competitive in the UK.

The UK termed the FTA as a huge economic win and said it would slash Indian tariffs on key products such as whisky and gin, cosmetics and medical devices, locking in reductions on 90 per cent of tariff lines for UK exports. India will cut tariffs on British whisky and gin from 150 to 75 per cent and further to 40 per cent by the tenth year of the deal. On British cars, India will reduce tariffs from 100 to 10 per cent, with both countries agreeing to cap the number of cars to be exported to each other.

PM Modi said the deal was mutually beneficial and ambitious. “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,” he said.

In the UK, the FTA with the world’s fastest growing economy is being seen as the biggest economic deal since Brexit. Starmer said the “landmark deal will grow the economy and deliver for British people and business”. “The deal delivers on plan for change as £4.8 billion will be added to the UK economy and £2.2 billion in wages every year in the long run under the deal,” a British government statement said.

The FTA comes in the backdrop of growing economic relations between India and the UK as exemplified in the bilateral trade of about USD 60 billion, which is projected to double by 2030.

On the application of the UK’s forthcoming carbon tax to Indian products—a controversial provision—talks are learnt to be ongoing. The deal was finalised after talks between Commerce Minister Piyush Goyal and UK Trade Secretary Jonathan Reynolds in London last Tuesday. Reynolds had restarted the FTA talks during his trip to Delhi in March.

“The FTA will benefit Indian farmers, fishermen, workers, MSMEs, startups and innovators. It brings us closer to our goal of becoming a global economic powerhouse,” said Goyal.