UK and India Agree Major Trade Deal After Three Years of Negotiations
The United Kingdom and India have finalized a significant trade agreement that aims to facilitate easier exports for UK businesses, including whisky, cars, and other goods, while reducing tariffs on Indian clothing and footwear. This landmark deal, which took three years to reach, was praised by both governments for its potential to boost economic growth and trade between the two nations.
Prime Minister Sir Keir Starmer emphasized that the agreement would benefit British people and businesses, stating that it would help ‘deliver for British people and business.’ The UK government estimates that the deal could increase trade between the two countries by an additional £25.5bn annually by 2040, on top of the current £42.6bn in trade.
India’s Prime Minister Narendra Modi called the agreement an ‘historic milestone,’ describing it as ‘ambitious and mutually beneficial.’ He highlighted that the pact would help ‘catalyse trade, investment, growth, job creation, and innovation in both our economies.’ The deal is expected to take effect within a year, with UK consumers likely to benefit from lower tariffs on a range of goods imported from India, including clothing, footwear, cars, and foodstuffs.
The agreement also includes provisions that will help UK firms expand exports to India, with specific reductions in tariffs on key products such as gin and whisky, aerospace, electricals, medical devices, and higher-value cars. Tariffs on UK-made cars exported to India will be reduced from 100% to 10%, subject to a quota limiting the total number of vehicles.
Additionally, the deal includes a three-year exemption from social security payments for certain Indian and British workers. This provision, which the Indian government called ‘an unprecedented achievement,’ applies to staff of Indian companies temporarily transferred to the UK and to UK firms’ workers transferred to India. Social security contributions will be paid by employers and employees in their home country only, rather than in both places.
While the agreement has been welcomed by many, it has also drawn criticism from some political figures. Opposition leader Kemi Badenoch described the agreement as ‘two-tier taxes from two-tier Keir,’ while Shadow Trade Secretary Andrew Griffith criticized the deal as a ‘loss for Britain.’ Liberal Democrat deputy leader Daisy Cooper expressed concerns about the tax implications for Indian workers in the UK and called for parliamentary approval of the deal.
The UK government has stated that the National Insurance exemption will not affect NHS funding, as Indians working in the UK would still be required to pay the immigration health surcharge. The deal is seen as a significant step in the UK’s efforts to secure trade partnerships amid rising global trade tensions, particularly in response to the US’s tariff policies under President Donald Trump.
India, currently the fifth-largest economy in the world, is projected to become the third-largest within a few years, making it a crucial trading partner for the UK, which is the sixth-largest economy. The deal aligns with India’s goal to increase exports by $1 trillion by 2030 and is viewed as a positive development in the context of global trade dynamics.
Business leaders have also welcomed the agreement, with Rain Newton-Smith of the CBI calling it a ‘beacon of hope amidst the spectre of protectionism.’ She noted that UK businesses have ‘myriad’ opportunities in the Indian market. Allie Renison, a former government trade adviser, described the deal as potentially ‘transformational’ due to India’s size, growth rate, and existing trade barriers.