India and UK Clinch ‘Historic’ Free Trade Agreement
On 6 May 2025, India and UK reached a Free Trade Agreement (FTA) after several stops and gos during the past three years. Analysts believe that the Trump’s tariff policy may have precipitated the accord. India PM Modi called it a ‘historic milestone’, while UK PM Keir Starmer described it as a ‘landmark trade deal’.
Amid fear of higher tariffs from Trump, India has put its #FTA negotiations into overdrive. Other than the UK FTA, India has simultaneously reignited trade negotiations with the EU, ASEAN, GCC, Canada, Saudi Arabia, Chile, Peru, New Zealand, and not to mention the USA. The deal with the UK comes after a diplomatic push with visits by Indian Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal all during the month of April 2025.
One of the key breakthroughs involves cutting tariffs on products which were considered off-limits only a few months ago. For instance, India has agreed to cut tariff on vehicles from the UK from 100% to 10%, albeit under a given quota. On the other hand, UK will eliminate duty on India apparel and footwear.
After a long debate, India has finally agreed to halve tariffs on whisky and gin from 150% to 75%. The tariff on these spirits will continue to decrease to 40% over a period of 10 years. However, the Indian alcoholic beverage industry was not too euphoric about this measure.
Another important component of the deal is the Double Contribution Convention which will allow skilled Indian workers in the UK and their employers to be exempted from social security contributions for the first three years.
For fiscal year 2023-2024, the bilateral trade volume between India and UK was about USD 52 billion. With the FTA in place, it is estimated that trade volume will increase by USD 34 billion by 2040. The FTA is expected to be ratified and to come into effect within one year.
During the same period of FY2324, the UK invested nearly USD 35 billion into India, positioning the UK as the 6th largest #FDI source for India. Thus, India and UK are entertaining talks on a Bilateral Investment Treaty to further drive investment flow.