This trade deal with the UK has been finalised at a time when India is also holding discussions on similar deals with countries/regions such as the US, the EU, Chile and Peru.
May 8, 2025 07:15 IST First published on: May 8, 2025 at 07:15 IST
After several rounds of negotiations, which involved discussions over contentious issues such as the carbon tax, India and the UK have finalised the long-awaited free trade agreement. This is a welcome trade push. The agreement, which has been concluded against the backdrop of the tariff war unleashed by US President Donald Trump, is arguably the most comprehensive deal that Delhi has entered into with a major developed country. It comes after trade deals with Australia and the UAE, which reflect the shift in Delhi’s approach towards embracing freer trade and integrating more deeply with global supply chains.
The UK is a significant trading partner for India. Bilateral trade between the two countries is about $60 billion, and is projected to double by 2030. The trade deal will eliminate tariffs levied by the UK on about 99 per cent of products, including labour intensive sectors such as textiles, footwear and manufacturing industries like electrical machinery and automobile components. The agreement also addresses some issues in labour mobility which have been pain points for India. Skilled Indian workers in the UK and their employers will now be exempt from paying social security contributions for three years. Alongside, India has got “commitments on digitally delivered services for Indian services suppliers”. On its part, Delhi has lowered tariffs on whiskey and gin to 75 per cent, and further to 40 per cent over 10 years. It has also reduced automotive tariffs to 10 per cent under a quota. Other areas where duties have been lowered are cosmetics, aerospace products, medical devices.
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This trade deal with the UK has been finalised at a time when India is also holding discussions on similar deals with countries/regions such as the US, the EU, Chile and Peru. As such, it not only sends a signal to these countries, but also provides a template for other agreements. There are already some indications that deals with the US and EU could fructify in the near term. The government must aim to conclude these agreements at the earliest. Alongside, it must take forward the domestic reform agenda, and address the long-standing structural impediments to growth.