India and UK Sign Landmark Free Trade Agreement Amid Global Trade Tensions

Strategic Insights -

India's prime minister, Narendra Modi, has signed a free trade agreement with the UK, a deal that analysts say signals a long-term economic partnership between the two nations. The agreement, which covers 99% of Indian exports to the UK and 90% of UK exports to India, is seen as a significant departure from India's traditionally protectionist trade stance. The deal is the UK's most economically significant trade agreement since leaving the EU, and for India, it marks its first major free trade pact outside Asia.

Key Takeaways:

  • The agreement will see 99% of Indian exports to the UK facing zero tariffs, with the UK seeing phased tariff cuts on 90% of its exports to India.
  • The deal includes concessions on work visas, recognition of professional qualifications, and exemptions from national insurance contributions for Indian nationals working temporarily in the UK.
  • India's government hopes the agreement will inject new energy into its Make in India drive and revive foreign direct investment, which has slowed significantly.
  • More than 5 million export-related jobs in India can be linked to UK exports, according to a research fellow at the Institute of Development Studies at the University of Sussex.
  • The agreement does not address sensitive issues such as the UK's proposed carbon tax, known as the carbon border adjustment mechanism (CBAM), which India sees as unfairly targeting developing economies.
  • The deal must still be ratified by both parliaments, likely delaying implementation until mid-2026.

Statistics:

  • 99% of Indian exports to the UK will face zero tariffs under the agreement.
  • 90% of UK exports to India will see phased tariff cuts.
  • Duties on scotch whisky will fall from 150% to 75% immediately and to 40% over 10 years.
  • British cars, currently facing tariffs of over 100%, will have duties slide to 10% under a quota.

Sources:

  • Indian government statement
  • The Hindu newspaper
  • Institute of Development Studies at the University of Sussex
  • Global Trade Research Initiative in New Delhi