After three years of intermittent negotiations, the United Kingdom and India have successfully reached a significant trade agreement aimed at enhancing commercial relations between the two nations. This landmark deal is designed to facilitate easier exports of British goods, including whisky and automobiles, to India while simultaneously reducing tariffs on Indian exports of clothing and footwear to the UK.
Key features of the trade agreement
The agreement, however, does not introduce any modifications to immigration policies, specifically regarding Indian students pursuing education in the UK, as confirmed by the British government. Business Secretary Jonathan Reynolds highlighted the substantial advantages this deal presents for UK enterprises and consumers, stating that the benefits are “massive.”
In the previous year, trade between the UK and India reached £41 billion and was already projected to increase. The government anticipates that this agreement will contribute an additional £25.5 billion annually by 2040, significantly bolstering trade between the two nations.
Economic impact and future implications
Mr. Reynolds met with India’s Commerce Minister, Piyush Goyal, in London last week to finalize the deal. The implementation of this agreement is expected to take up to a year. Once in effect, UK consumers will likely see reduced tariffs on a variety of Indian goods entering the country, including clothing and certain food products like frozen prawns.
The government has emphasized the anticipated benefits for economic growth and job creation resulting from increased UK exports to India. Tariffs on gin and whisky will be cut from 150% to 75%, with further reductions planned for subsequent years. Additionally, levies on automobiles, aerospace products, electrical goods, and some food items from the UK will also see a decline.
“This is arguably the most economically transformational free-trade deal in the UK’s post-Brexit landscape of agreements lined up, particularly because of India’s size, growth rate and relatively high barriers to accessing its market,” said Allie Renison, a former government trade adviser.
The British government has labeled this agreement as the “biggest and most economically significant” bilateral trade deal since the UK departed from the European Union in 2020. Prime Minister Sir Keir Starmer characterized it as a “landmark deal” poised to stimulate growth and deliver tangible benefits for both British citizens and businesses.
In a similar vein, India’s Prime Minister Narendra Modi hailed the agreement as an historic milestone, describing it as both “ambitious and mutually beneficial.” India is projected to become the world’s third-largest economy within the next few years, further underscoring the importance of this trade agreement.
The tariff campaign initiated by former US President Donald Trump has influenced other nations to reconsider their trade strategies, prompting a renewed urgency to establish trade agreements. The UK remains a key trading partner for Prime Minister Modi’s administration, which has set an ambitious goal of increasing exports by $1 trillion by 2030.