India and the United Kingdom signed a historic Free Trade Agreement (FTA) on July 24 during Prime Minister Narendra Modi’s visit to London. This marks India’s first major trade pact with a developed nation in more than 10 years. After nearly three years of talks, the deal now awaits legal clarity from both the British Parliament and India’s Union Cabinet, and is likely to take effect sometime in the next year. The India-UK trade deal reduces tariffs, opens up a new market, and boosts investment and mobility between the two economies.
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What Gets Cheaper?
India will reduce import duties on Scotch, whisky, and gin from 150% to 75% immediately, eventually bringing it down to 40% over 10 years. Luxury cars from the UK, including Jaguar, Land Rover, and Aston Martin, will face lower import duties in India, down to 10% under a limited quota. Everyday items like chocolate, biscuits, cosmetics, salmon, and medical equipment will also become more affordable with tariff cuts. In exchange, the UK will allow 99% of Indian exports to enter without an import duty. This includes goods like clothing, shoes, processed foods, and auto parts. Indian companies such as Welspun, Arvind, Bata, Mahindra Electric, and Bharat Forge are expected to gain the most from the India-UK trade benefits.
Visa Relaxation for Indians
The FTA includes visa relaxations for Indian chefs, yoga instructors, musicians, and other service professionals. Indian workers posted in the UK will be exempt from social security payments for up to three years, saving companies and employees close to Rs 4,000 crore annually. UK companies will gain access to India’s federal procurement contracts above Rs 2,000 crore, tapping into the Rs 4 lakh crore market. More than 1,000 Indian firms currently have operations in the UK, together employing over 1 lakh people and investing close to $20 billion. On the other hand, the UK has pumped in around $36 billion into India, ranking as the country’s sixth-largest source of foreign investment.