The United Kingdom and India have officially signed a significant trade deal aimed at facilitating trade between the two nations. This deal will bring down the cost and hassle of buying and selling goods and services across borders. Indeed, this is exactly what experts expect it to do by approximately £4.8 billion in the long term. This deal represents the culmination of a years-long effort to reset UK-India relations. It is being touted as the UK’s most economically important trade agreement since its withdrawal from the European Union in 2020.
Particularly given that these trade negotiations have already stretched for three years. Despite this long process, its convoluted and complicated nature underscores the depth and importance of the economic relationship between both countries. Last year, trade between the UK and India reached a new record of £42 billion. With India poised to become the world’s third-largest economy in short order, this new agreement is guaranteed to bilaterally boost trade at an accelerated pace.
As part of efforts to increase trade, the UK Government recently announced the removal of tariffs on a number of imported Indian goods. To opaque tariff items, e.g. clothing, footwear, frozen prawns, jewelry and certain motor vehicles. India has already made major concessions, slashing duties on dozens of UK imports. These are things like cosmetics, scotch whisky, gin, soft drinks, high-value cars and food products such as lamb, salmon, chocolate and biscuits. These reforms will result in lower prices and more variety for consumers in both countries.
The deal puts particular emphasis on progress made in cutting car tariffs in India from 60% to 10%. These restrictive tariffs will soon decrease from over 100% to a mere 10%. Similarly, tariffs on whisky and gin imported from the UK will be halved from 150% to 75%, with further reductions planned to 40% by the tenth year of the deal. These measures aim to improve competitive advantage for British goods in the Indian market.
The agreement opens up thrilling new prospects for UK companies. In India, they can now compete for a larger range of services contracts, deepening our bilateral economic engagement beyond goods alone. The agreement provides for a three-year waiver of social security contributions. This benefit is limited to Indian nationals employed in UK on short-term visas. Firstly, let’s be clear – the new deal is not going to alter immigration policy for Indian students in the UK. Unlike Porsche, their fortunes have not changed.
The UK government has also been bullish on the long-term impact this trade agreement will have. They project impacts from the first scenario, which include lowering tariffs on imports of clothing, jewelry and frozen cooked prawns to decrease consumer costs. This adjustment will help provide shoppers a greater range of options in a competitive marketplace. They project that this agreement alone could increase trade by another £25.5 billion per year, growing to 2040.
Jonathan Reynolds commented on a specific aspect of the deal regarding visa provisions:
“It opens up a small number of visas from an existing route for chefs and musicians and yoga teachers, very, very small, about 1,800.” – Jonathan Reynolds
This flexible model of visa agreements is demonstrative of how both countries are currently leading conversations on international labor mobility. Simultaneously, the UK is taking stock of its own domestic priorities.