India and the UK on July 24 signed an “historic” trade deal during Prime Minister Narendra Modi’s two-day visit. The deal will provide significant boost to the trade between the two countries as it gives more access to each other’s markets, with major tariff cuts on goods from textile to whiskey and cars.
The talks for the trade pact was concluded in May this year following negotiations that spanned over three years. The talks gained steam after US President Donald Trump unleashed tariff chaos, forcing the two nations to hasten the efforts.
The deal between the fifth and the sixth largest economies of the world seeks to hike the trade by $34 billion more by 2040. Two-way trade between the two nations stood at $21.9 billion in 2024.
Both the prime ministers praised the deal, with Modi saying it will “go a long way” in advancing the partnership, while Starmer pointing out the “huge benefits” this agreement will bring for both nations.
So, how will this deal translate into a new phase of growth for India?
-The deal successfully has achieved preferential market access for Indian farmers to UK’s 37.5 billion agricultural market, while protecting sensitive sectors such as dairy, vegetables, apples, cooking oils and oats.
-Big catch for Indian fishermen: The deal provides India major access to UK’s $5.4 billion market for marine exports as Britain’s import duty on marine products will fall to zero from up to 20 percent.
-It will also give a big boost to job creation as labour-intensive sectors will get competitive edge in UK
-The FTA will bring down the import duty on major sectors such as textiles, clothing, chemicals and base metals to zero.
-The rural economy and the exporters will gain massively with duty of up to 70 percent earlier on processed foods coming down to zero.
- Under the deal, the Double Contributions Convention (DCC) will exempt workers, employers from social security contribution for 3 years. The move will help 75,000 Indian workers in UK.
-Professionals to get better mobility access to UK
-Up to 1,800 Indian chefs, yoga instructors and classical musicians can move temporarily to UK to provide services
- Indian auto manufacturers will gain access to the UK market for electric and hybrid vehicles
How the UK will benefit?
As part of the agreement, New Delhi will cut tariffs on Scotch whisky to 75 percent from 150 percent immediately, and then slide to 40 percent over the next decade, according to the UK. On cars, India will cut duties to 10% from over 100% under a quota system that will be gradually liberalised.
For Starmer, the deal will be a welcome step toward his goal of boosting economic growth in the UK. While it is expected to add £4.8 billion ($6.5 billion) to the UK’s annual economic output — a tiny increase to the size of the economy — Starmer’s Labour government hopes successive incremental wins will help encourage investment and turn around lackluster business sentiment.
With agency inputs
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