Britain and India are set to sign a groundbreaking free trade agreement during Indian Prime Minister Narendra Modi’s visit to the UK. The deal, finalized after three years of negotiations, will slash tariffs on goods ranging from textiles to whisky and cars while opening up markets for businesses on both sides.
The agreement between the world’s fifth and sixth largest economies aims to boost bilateral trade by 25.5 billion pounds ($34 billion) by 2040. Once ratified by the British parliament and India’s federal cabinet, it’s expected to take effect within a year. British Prime Minister Keir Starmer hailed it as a major win, claiming it will create jobs and drive economic growth across the UK.
Modi’s visit marks his fourth trip to Britain since taking office in 2014. Beyond trade, the two leaders will also sign a strategic partnership covering defense, climate action, and crime prevention. The deal reflects both nations’ eagerness to strengthen ties amid shifting global trade dynamics influenced by policies like those of former U.S. President Donald Trump.
Key highlights of the trade agreement include drastic tariff reductions. For Scotch whisky, duties will drop from 150% to 75% immediately, followed by a gradual decline to 40% over the next decade. India’s hefty car tariffs, currently exceeding 100%, will also be cut to 10% under a quota system that will ease over time. In return, Indian electric and hybrid vehicle manufacturers gain better access to the UK market.
India’s commerce ministry estimates that 99% of its exports to Britain, including textiles, will benefit from zero tariffs. Meanwhile, the UK will see reduced duties on 90% of its tariff lines. For British businesses, the deal opens doors to India’s procurement market, particularly in clean energy projects, and expands opportunities in sectors like insurance.
The agreement is particularly significant for Britain as its first major trade deal since leaving the European Union in 2020. However, the projected economic boost—4.8 billion pounds annually by 2040—is relatively modest compared to the UK’s GDP of 2.6 trillion pounds.
Other notable provisions include easier access for temporary business travelers and the elimination of dual social security contributions for workers posted temporarily in either country. However, issues like India’s request for an exemption from Britain’s Carbon Border Adjustment Mechanism (CBAM) remain unresolved. Talks on a separate bilateral investment treaty also continue.
With this deal, both nations aim to deepen economic cooperation while navigating the challenges of global trade. The focus now shifts to implementation and the potential ripple effects across industries in the coming years.