UK and India signed a historic free trade agreement on Thursday (July 24), covering a wide range of products including textiles, whisky, automobiles, among others. The agreement aims to reduce bilateral tariffs and expand market access, with both countries expecting to complete their respective domestic approval processes within a year.
According to reports from Reuters, the negotiations lasted for three years, with the text finalized in May this year. The agreement was officially signed at the Chequers residence by UK Prime Minister Keir Starmer and visiting Indian Prime Minister Narendra Modi. This marks the largest trade agreement for the UK post-Brexit and a significant strategic cooperation for India with a developed economy, potentially setting a template for future agreements with the European Union and other regions.
The UK and India hope that through this agreement, bilateral trade will increase by an additional £25.5 billion (approximately $34 billion) by 2040. It is expected that the agreement will be ratified domestically within a year, benefiting whisky producers like Diageo, as well as car manufacturers such as BMW, Nissan, Aston Martin, and Jaguar Land Rover under the Tata Group, due to tariff reductions.
The agreement targets to boost bilateral trade by £25.5 billion by 2040. By then, companies such as Diageo and car manufacturers like BMW, Nissan, Aston Martin, and Jaguar Land Rover under Tata Group are expected to benefit from tariff reductions.
Both parties describe the agreement as having historical significance. Starmer stated that the agreement will make UK-India trade “cheaper, faster, and more convenient.” Modi referred to it as a “blueprint for mutual prosperity,” emphasizing that Indian textiles, jewelry, and seafood will receive better market access.
In terms of tariff details, the tariff on Scottish whisky will immediately decrease from 150% to 75%, further lowering to 40% within the next decade. Tariffs on brandy and rum will also decrease from 110% to 75%. Regarding automobiles, India will reduce the current maximum import duty of 110% to 10% over five years. In exchange, the UK will open its market to Indian electric and hybrid vehicles, both with quotas.
The agreement will grant zero tariffs for 99% of Indian exports to the UK, including textiles; while 90% of UK tariff lines will see reductions, bringing the average tariff faced by UK businesses down from 15% to 3%.
Additionally, the agreement covers services such as insurance and relaxes temporary business visitor requirements. Although it does not include visa provisions, both sides agree that expatriate employees will not have to repeatedly contribute to social security. UK businesses will also be able to participate in Indian government procurement in sectors like clean energy.
Indian Commerce Minister Piyush Goyal emphasized that this agreement demonstrates India’s active efforts to align with developed nations. Although negotiations on investment treaties with the European Union are still pending, Goyal stated, “This shows that India is serious about it.”