India and UK seal landmark free trade deal to boost jobs, investment, and strategic ties

By: Team India Tracker

While agreement was reached on the majority of the FTA’s 26 chapters, the process faced delays due to the political upheaval in the UK, including four changes in prime ministers since talks began in 2022

India and the United Kingdom have officially concluded their long-awaited bilateral trade agreement, marking a significant milestone in their economic relationship. Announced on May 6, the in-principle free trade agreement (FTA) follows 14 rounds of intense negotiations. UK Prime Minister Keir Starmer is expected to visit India later this year to formally sign the deal.

While agreement was reached on the majority of the FTA’s 26 chapters, the process faced delays due to the political upheaval in the UK, including four changes in prime ministers since talks began in 2022, as well as the elections held in both countries last year.

Under the terms of the agreement, India has committed to reducing tariffs on 90 percent of British products, including automobiles (which will see duties cut from 100 percent to 10 percent), whiskey and gin (tariffs will drop from 150 percent to 75 percent, with further reductions to 40 percent over the next decade), and a range of other goods such as food and beverages, aerospace products, medical devices, cosmetics, and electrical machinery. These tariff reductions are projected to save British exporters more than £400 million annually, based on 2022 trade figures.

In addition to trade tariffs, the FTA includes provisions on environmental and labor standards, gender equality, and anti-corruption measures, reflecting a broader commitment to sustainable and ethical practices. The agreement is part of a larger set of economic pacts between the two nations. In addition to the FTA, India and the UK have also finalized a social security agreement, known as the Double Contribution Convention, though discussions around a Bilateral Investment Treaty (BIT) are still ongoing.

The issue of national insurance contributions has been addressed through a new social security agreement, allowing Indian and British workers temporarily residing in each other’s countries to be exempt from paying national insurance for up to three years. While discussions are still ongoing regarding the carbon tax, the mobility aspect has been tackled with expedited visa processes for Indian professionals in specific sectors.

Source: Ministry of Commerce and Industry

The UK has secured several trade agreements in recent years, including with Australia, Japan, and Singapore. However, the deal with India stands out as the most significant bilateral agreement since the UK’s departure from the EU in 2016. India, currently the UK’s 11th largest trading partner, saw bilateral trade reach £42.6 billion in 2024, accounting for 2.4 percent of the UK’s total trade. The FTA is expected to increase bilateral trade by £25.5 billion by 2040, boost the UK’s GDP by £4.8 billion, and add £2.2 billion in annual wages.

The deal is equally vital for India. While India's trade with China and the United States far exceeds its commerce with the UK, Britain remains an important partner. India's exports to the UK are six times greater than to Russia, another key strategic ally. Beyond the UK, India is also in the process of negotiating trade agreements with both the European Union and the United States.

The Free Trade Agreement (FTA) is expected to significantly boost bilateral trade, create job opportunities, raise living standards, and improve the overall quality of life for citizens in both countries. It reinforces the foundation of the India-UK Comprehensive Strategic Partnership, providing a framework for deeper cooperation and economic growth, as stated in the official announcement.

Typically, Free Trade Agreements aim to lower or eliminate customs duties on traded goods while streamlining regulations around services trade and investment. India is particularly focused on securing greater opportunities for its skilled professionals in the UK’s IT and healthcare sectors, alongside gaining duty-free access for a range of products.