After years of negotiations, the United Kingdom and India have finally struck a free trade agreement (FTA), marking a significant milestone in their economic relationship. Announced on May 6, 2025, this deal is touted as the "biggest and most economically significant" trade agreement the UK has signed since leaving the European Union in 2020, according to the British government.
The FTA aims to make it cheaper and easier for both countries to buy and sell goods and services. The UK has agreed to lower taxes on various imports from India, including clothing, footwear, food products like frozen prawns, jewelry, and some cars. In return, India has cut taxes on several goods imported from the UK, such as cosmetics, scotch whisky, gin, soft drinks, higher-value cars, and food items including lamb, salmon, chocolate, and biscuits.
One of the most notable aspects of the agreement is its potential impact on the whisky industry. Tariffs on whisky and gin exported from the UK to India will decrease significantly, halving from 150% to 75% initially, and eventually dropping to 40% by the tenth year of the deal. This reduction is expected to boost exports to India by £1 billion over the next five years, creating approximately 1,200 jobs across the UK, as stated by Mark Kent, chief executive of the Scotch Whisky Association.
In addition to whisky, the deal will also see car tariffs fall from over 100% to just 10%, providing a much-needed boost to UK automotive manufacturers. The agreement is anticipated to increase bilateral trade by £25.5 billion annually by 2040, with projections that it will contribute an additional £4.8 billion to the UK economy.
Despite the optimistic outlook, the FTA is not without its compromises. Negotiations have been ongoing for over three years, with various sticking points, particularly regarding visa regulations for Indian professionals. Although the final agreement does not alter the UK's immigration policy, it includes a three-year exemption on social security contributions for Indian employees working in the UK on short-term visas. This "Double Contribution Convention" is designed to prevent dual contributions to social security in both countries.
Business Secretary Jonathan Reynolds emphasized that the deal would make it easier for skilled professionals from India to work temporarily in the UK, stating, "It opens up a small number of visas from an existing route for chefs, musicians, and yoga teachers, very, very small, about 1,800." This limited cap on visas has been a point of contention, with critics arguing that it does not go far enough to meet India's demands for greater work opportunities for its citizens.
Furthermore, the UK government has assured that the points-based immigration system will remain unaffected by this trade agreement. The deal is expected to lock in reductions on 90% of tariff lines, with 85% of these becoming fully tariff-free within a decade. The initial cuts in Indian tariffs are projected to exceed £400 million, doubling to around £900 million after ten years.
As the agreement unfolds, UK consumers may begin to see lower prices and increased choices in products, particularly in clothing, footwear, and food items. The British Department for Business and Trade has indicated that these tariff reductions could lead to a more competitive market, benefiting both consumers and businesses.
The UK-India FTA is the third largest that the UK has signed, following agreements with Australia and Japan. However, the UK still faces competition from the European Union, which is also negotiating a free trade agreement with India. Both India and the EU aim to finalize this deal by the end of 2025, which could overshadow the UK's efforts.
In summary, the UK-India free trade agreement signifies a historic step in strengthening trade ties between the two nations. While it offers promising economic benefits, the success of the deal will depend on its implementation and the ongoing negotiations regarding work opportunities for Indian professionals. Prime Minister Keir Starmer hailed the agreement as a landmark deal with one of the fastest-growing economies in the world, stating, "Today we have agreed a landmark deal with India that will grow the economy and deliver for British people and business."
As both countries move forward, the focus will be on ensuring that the benefits of this agreement are realized for businesses and consumers alike, while also addressing the concerns surrounding immigration and work opportunities.
