UK and India Sign Major Free Trade Deal During Modi Visit

 

India and the United Kingdom have signed a landmark free trade agreement during Indian Prime Minister Narendra Modi’s visit to Britain. This deal is set to reduce tariffs and boost business opportunities between the world’s fifth and sixth largest economies. After three years of stop-start negotiations, talks concluded in May, paving the way for this major economic partnership. The agreement is expected to take effect after it goes through a ratification process, likely within a year. British Prime Minister Keir Starmer hailed the deal as a sign of a new global era of cooperation, stating it would make trade faster, easier, and cheaper for both countries. Modi echoed the optimism, saying the visit would strengthen economic ties between India and the UK. Under the agreement, Scotch whisky tariffs will fall from 150% to 75% immediately and drop to 40% over the next decade. Indian tariffs on British car exports will also be reduced from over 100% to 10% under a quota-based system. In return, India will get more access to the UK market for electric and hybrid vehicles. The UK’s average tariff on Indian goods will fall from 15% to 3%, and 99% of Indian exports to Britain will receive zero duties. Textiles and services are among the key beneficiaries. The agreement also includes new partnerships in defense, climate action, and law enforcement. While the economic gain for Britain is relatively modest adding about £4.8 billion a year to its economy by 2040 the deal holds major symbolic value as the UK’s largest trade pact since leaving the EU. It represents India's most significant partnership with an advanced economy to date and could serve as a model for future deals with the EU and others.

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The UK-India free trade agreement includes wide-ranging terms beyond just tariff reductions. British businesses will now have access to India’s procurement market, particularly in sectors like clean energy. Service industries such as insurance are also included in the deal, offering new growth opportunities for both sides. The agreement sets up a framework for easier access for temporary business travelers. Although it does not include new visa rules, it does eliminate the need for social security contributions in both countries during short-term assignments, reducing costs and administrative burden for international workers. Indian manufacturers, especially in sectors like textiles and automotive, are expected to benefit from better access to the UK market. Nearly all Indian exports 99% will face zero tariffs, boosting India’s trade reach in one of the world's largest consumer markets. In contrast, 90% of British tariff lines will be reduced, creating a more balanced trade environment. However, India was unable to secure an exemption from the UK’s upcoming Carbon Border Adjustment Mechanism (CBAM), which from 2027 may tax goods based on their carbon emissions. Talks on a separate bilateral investment treaty are ongoing, which could further deepen economic ties. The Confederation of British Industry praised the deal as a signal that Britain remains open for business in a time of rising global protectionism. The Office for Budget Responsibility has noted that while this deal is significant, it does not fully offset the broader economic impact of Brexit. UK trade is still expected to be about 15% lower in the long run compared to if the country had remained in the European Union. Still, the agreement marks a strategic shift for both countries and reinforces the UK’s efforts to rebuild its global trade network post-Brexit, while giving India a template to expand its trade with other major economies.

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