UK and India Finalize Landmark Trade Agreement After Three Years of Negotiations
Key Details of the Agreement
The UK and India have finalized a major trade deal after more than three years of negotiations, marking a significant milestone in post-Brexit trade relations. The agreement, which was announced on Tuesday, aims to reduce tariffs and boost the UK economy by an estimated £4.8 billion by 2040.
Prime Minister Keir Starmer called the deal a “landmark” achievement, stating it will “grow the economy and deliver for British people and businesses.” The agreement is expected to benefit key sectors such as the car and alcohol industries, which have faced challenges due to US tariffs.
Trade Benefits and Economic Impact
The deal includes tariff reductions for goods from both countries across nearly all sectors. India’s tariffs on British whisky and gin will be cut from 150% to 75%, with further reductions planned by the 10th year of the agreement. British car tariffs will be reduced from around 110% to 10%, with quotas set for the number of cars that can be exported to India.
India will lower tariffs on 90% of British products, including cosmetics, lamb, salmon, soft drinks, and medical devices. The UK will also reduce tariffs on Indian clothing, footwear, and food products, which is expected to bring down prices and increase consumer choice.
According to officials, the tariff cuts will generate £400 million in economic benefits from the day the deal is implemented. The agreement is projected to increase bilateral trade between the UK and India by £25.5 billion by 2040, boost the UK’s GDP by £4.8 billion, and raise wages by £2.2 billion annually.
Controversial Tax Exemption Clause
One of the most controversial aspects of the agreement is a provision that exempts Indian workers temporarily seconded to the UK and their employers from national insurance contributions (NICs) for three years. This has sparked criticism, with Conservative Party leader Kemi Badenoch calling it a “system of two-tier taxes.”
Home Secretary Yvette Cooper was reportedly not informed about the tax exemption clause, leading to concerns over transparency and oversight. The decision has been criticized for creating an imbalance, as UK employers are facing higher NICs while Indian workers are exempt.
Business and Trade Secretary Jonathan Reynolds defended the move, stating that the agreement ensures social security systems are not duplicated for workers in inter-company transfers between the UK and India. However, he acknowledged that some people may be “getting a little bit carried away” about the implications of the agreement.
Political Reactions and Future Steps
The deal has received mixed reactions from political figures. While some Conservative MPs praised the agreement, others, including Badenoch, have criticized the tax exemption clause. Labour’s Starmer has expressed optimism about the deal’s potential economic benefits.
Prime Minister Modi and Starmer are expected to meet in the coming months to sign off the deal before it is ratified by both countries’ parliaments. The agreement also includes chapters on anti-corruption, gender equality, and environmental standards, reflecting a broader commitment to economic and social cooperation.
Historical Context and Future Prospects
The trade deal has been a long-standing goal for the UK since leaving the EU. Previous attempts by Conservative governments, including those of Boris Johnson and Liz Truss, failed to secure a deal before the 2022 general election. Under Rishi Sunak, negotiators came close to finalizing the agreement but had to put it on ice due to the UK election.
Reynolds said the deal is a major step forward for the UK economy, creating jobs and boosting growth. Industry leaders, including the Scotch Whisky Association, have praised the agreement for its potential to increase exports and create jobs in the UK.
As the UK and India work to finalize the agreement, the focus will be on ensuring that the deal is implemented effectively and that the benefits are widely shared across both countries.