The United Kingdom and India have just completed negotiations on a significant bilateral trade agreement. This achievement is seen as a watershed moment in their economic partnership. During the period this deal was negotiated, global trade tensions had begun to spike dramatically. Its aim is to reduce tariffs on key British exports such as whisky and cars.
The deal will reduce the tariffs imposed on imports of U.K. whisky and gin from the current 150% to 75%. In fact, one leading trade expert predicts these tariffs may fall to an average of 40% in just 10 years. Numerous automotive tariffs, some of which were well over 100% before the agreement, will be cut in half to 10%. This smart play will greatly accelerate commerce betwixt the pair of countries. According to estimates, bilateral trade might grow by £25.5 billion, more than $34 billion.
The backdrop to this trade agreement is a broader trade conflict initiated by the United States, intensifying the need for countries to secure their economic interests. As of 2024, the U.K. and India have flourished into a trading partnership of goods totally £42.6 billion, better than the 3.7% increase from last year. The U.K. has a combined goods and services trade deficit with India of £8.4 billion.
As part of the deal, India will reduce taxes on U.K. imports. Phasing these taxes down step-by-step will go a long way toward reducing the trade burden. The vast majority of goods traded between the two countries are projected to become fully tariff-free within the next decade, promoting further economic cooperation.
Indian Prime Minister Narendra Modi called the agreement a “historic milestone,” highlighting its ambitious nature and mutual benefits. He stated,
“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.”
Modi further highlighted the importance of these agreements in deepening the bilateral relationship:
“These landmark agreements will further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies.”
Keshav R. Murugesh, a leading Indian economist, underscored the imperative timing of such a deal. He especially emphasized that it is a critical first step, given today’s global economic climate. He remarked,
“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.”
He continued that this agreement is especially important given the increasing trade tensions around the globe.
An equally delighted British Prime Minister, Keir Starmer, chimed in on the announcement, adding
“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.”