India and the United Kingdom have signed a free trade agreement (FTA).
The development came in the backdrop of
Prime Minister Narendra Modi’s visit to the UK.
India and the UK had been negotiating the deal for years.
Modi said the agreement will reduce “cost of doing business” and enhance “confidence of doing business” between two major economies.
“Along with this agreement, we have also reached a consensus on the Double Contributions Convention. This will inject new energy into the service sectors of both countries, especially in technology and finance. It will promote ease of doing business, reduce the cost of doing business, and increase the confidence of doing business,” Modi said. He added that the deal will strengthen the global economy.
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Starmer dubbed the deal ‘historic’.
“Both countries will see a boost in wages and living standards. It will bring down the prices of Indian clothes, shoes, foods for British citizens”, he added.
This was Modi’s fourth trip to the UK since coming to power in 2014.
He will head to the Maldives next tomorrow (July 25).
India is also trying to negotiate a similar agreement with the United States.
But what do we know about the India-UK FTA? What’s in it? How do India and UK benefit?
Let’s take a closer look:
What we know
Negotiations for the deal began in January 2022 under the previous Conservative government.
Then prime minister Boris Johnson had ordered negotiators “to get it done by Diwali in October”.
However, the talks over the deal have stretched on for years before concluding in May 2025.
Modi in May announced that India and the UK had reached an agreement.
He hailed it as a ‘historical deal’.
This
is India’s first such agreement with another nation in over a decade.
This is the UK’s fourth trade agreement since Brexit.
Bilateral trade between the two countries was at $55 billion in 2023/24.
The deal aims to double bilateral trade to around $120 billion by 2030.
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The deal includes a
double contribution convention – also known as a social security pact – which will help Indian workers.
This exempt Indian professionals and companies from social security contributions in the UK for three years — a move described by the Indian government as a “huge win”.
The idea behind it is to stop employers and employees from the burden of contributing to social security in multiple countries.
The FTA is extremely detailed – comprising 26 chapters on goods, services, investment, and intellectual property rights.
The deal will likely come into effect within a year.
It is yet to be cleared by Britain’s Parliament.
India and the UK are negotiating a Bilateral Investment Treaty (BIT) on a parallel track.
India has FTAs with Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, Korea, Japan, Australia, UAE, Mauritius, the 10-nation bloc ASEAN (Association of Southeast Asian Nations), and four European nations’ bloc EFTA (Iceland, Liechtenstein, Norway, and Switzerland).
India is also currently negotiating FTAs with the US, Oman, the European Union (EU), Peru, and Israel.
STORY CONTINUES BELOW THIS ADHow India benefits
The deal will allow 99 per cent of Indian exports to the UK to fall under zero-duty category.
This will boost labour-intensive sectors such as textiles, leather, apparel and footwear, toys, marine products, gems and jewellery.
Many of these currently face tariffs ranging from 4 per cent to 16 per cent.
This will make Indian goods more competitive in the UK market.
India’s leather goods could increase their share of the UK’s market by up to five per cent.
Engineering goods, auto components, electric and hybrid vehicles, and sports goods will also benefit.
Engineering and electronic exports to the UK could potentially double by 2030.
The double contribution pact will be of great help to Indian workers in the UK.
It will exempt them from paying into social security for a period of three years.
This will save them up to Rs 4,000 crore every year.
The deal will also give Indian yoga instructors, chefs, musicians, and other contractual workers greater access to the UK.
Business visitors, investors, and intra-corporate transferees will also gain.
Under such an agreement, an employee working in a foreign nation is exempt from paying into the social security programme of that nation. Representational Image/ Freepik.
“The UK is an important market for Indian exporters,” Ajay Sahai, director general of the Federation of Indian Export Organisation, said
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Around 95 per cent of agricultural and processed food items will become exempt British tariffs.
Those exporting turmeric, pepper and cardamom as well as processed products like mango pulp, pickles, and pulses, are expected to benefit.
Exports such as shrimp and tuna and feeds that attract levies ranging from 4.2 per cent to 8.5 per cent will now be duty-free.
The deal is expected to benefit firms such as Welspun India, Arvind Ltd, Bata India, Relaxo, Tata Motors, Mahindra Electric, and Bharat Forge.
It will also increase the flow of investment to India.
The UK is currently India’s sixth-largest foreign investor.
It has already invested $36 billion in India.
British firms could partner with Indian companies under the FTA and receive benefits.
“This is a significant agreement,” Vikram Misri, India’s foreign secretary, told reporters on Tuesday.
Carbon Clean, a carbon capture service provider, is set to invest $10 million in an office in Mumbai.
The company, which is headquartered in London, was founded in India in 2009.
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Meanwhile, Occuity, a UK-based medical technology firm has signed a $100 million export deal with Indian firm Remidio Innovative Solutions.
How UK benefits
The UK has called this its “biggest and most economically significant” deal since it signed a similar agreement with the EU.
The government has called it a “huge economic win for the UK” and a “landmark trade deal”.
India will eliminate tariffs on 90 per cent of UK goods.
This includes cutting tariffs on Scotch whisky and gin to 75 per cent from 150 per cent.
By year 10, this will be reduced to just 40 per cent.
The Scotch Whisky Association has called the deal “transformational”
Cars being sent to India, which currently face 100 per cent tariffs, will be cut to just 10 per cent.
Cosmetics, salmon, chocolates, medical devices, and biscuits will also see tariffs lowered under a quota.
UK Prime Minister Keir Starmer The government has called it a “huge economic win for the UK” and a “landmark trade deal”. AP
British consumers will get the benefits of these products becoming cheaper.
Tariffs will also be cut on machinery and aerospace equipment.
Firms such as Diageo and carmakers like Aston Martin and Jaguar Land Rover will get a boost.
There are around 1,000 Indian companies operating in the UK who employ around 100,000 people.
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Indian businesses could further invest in healthcare, transport, and energy sectors under the FTA.
Additionally, British firms investing in India could receive preferential treatment under the ‘Make in India’ policy.
Airbus and Rolls Royce have already netted deals in the aftermath of the FTA being signed.
The companies headquartered in France and the UK have signed a $5 billion deal with Indian airlines for aircraft and engines.
They aren’t alone.
The deal is expected to boost the UK economy by $6.5 billion by 2040.
Exports to India will increase by $21 billion by that year – around 69 per cent.
UK firms will be allowed to bid for non-sensitive tenders in India above Rs 2 billion.
The UK says it could allow access to around 40,000 tenders worth Rs 4.09 lakh crore every year.
With inputs from agencies