India and UK Sign A Blockbuster Trade Deal

India and UK have announced they had successfully negotiated a bilateral Free Trade Agreement (FTA). Prime Minister Narendra Modi and UK Prime Minister Sir Keir Starmer made the announcement on Tuesday.

Starmer said this was the UK’s biggest trade agreement since it left the European Union (EU).

The deal came after intense trade negotiations between the two countries that gathered pace after November 2024 when the two leaders met at the G-20 summit in Rio de Janeiro. The FTA includes both goods and services traded between the two countries.

In 2023-24, UK was India’s 14^th biggest trading partner with two-way trade at $21.34 billion. India had a trade surplus of $4.5 billion. In value terms this trade grew by 8.3% in 2024-25 but is still nowhere near India’s large trading partners such as the US and China, let alone supra-national trading blocs like the EU ($135 billion) and the Gulf Cooperation Council ($1602 billion).

This is set to change in the coming decade. The UK government said the trade deal would add $34 billion in trade by 2040. Given the rising tide of protectionism across the global economy, the agreement marks a departure from the gloom and doom being witnessed across the world where tariffs and counter-tariffs have made trade very difficult and unpredictable.

In the past five years India has signed trade agreements and comprehensive economic agreements with countries as diverse as Australia and the UAE. It is also negotiating agreements with the US, talks for which are at an advanced stage and with the EU as well.

Under the agreement India will reduce tariffs on 90% of UK imports into India while 99% of Indian exports will see reduced tariffs. A government release said that, “The FTA eases mobility for professionals including Contractual Service Suppliers; Business Visitors; Investors; Intra-Corporate Transferees; partners and dependent children of Intra-Corporate Transferees with right to work; and Independent Professionals like yoga instructors, musicians and chefs.” Mobility of professionals is a key demand made by India in negotiating such agreements.

Exports of alcoholic spirits such as whisky and gin from UK will witness tariff reductions from 150% to 75% before finally coming down to 40% by 2040. For India, access to the UK market for clothing, footwear and food items of great importance as India has not been able to compete against countries that either had preferential access or had exceptionally low labour costs. Now this will change.

The two countries are also in talks to conclude a bilateral investment treaty.

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