The UK and India have struck an ambitious trade deal that promises to reshape economic ties between the two nations significantly. Announced on May 6, 2025, this landmark agreement will slash tariffs on various products, including whisky and gin, and is projected to boost the UK economy by £4.8 billion annually.
The deal, hailed by Prime Minister Sir Keir Starmer as the most significant post-Brexit trade agreement, aims to increase bilateral trade by £25.5 billion in the coming years. It is expected to create approximately 1,200 jobs across the UK, particularly in the whisky sector, where tariffs on Scotch will be halved from 150% to 75%, eventually dropping to 40% by the tenth year of the agreement.
Starmer described the agreement as a "landmark deal with India – one of the fastest growing economies in the world, which will grow the economy and deliver for British people and business." He emphasized that this deal would be measured in billions of pounds into the UK economy and jobs across the country.
Indian Prime Minister Narendra Modi also welcomed the agreement, calling it a "historic milestone" that would catalyze trade, investment, growth, job creation, and innovation in both economies. He expressed optimism about strengthening the Comprehensive Strategic Partnership between the two nations.
A key feature of the deal is the reduction of tariffs on agricultural products. For instance, lamb exports, previously subject to a 33% import duty, will become tariff-free, enhancing their competitiveness in the Indian market. Tony Goodger, head of communications at the Association of Independent Meat Traders, noted that this is excellent news for UK lamb processing members, especially for premium brands targeting India’s growing middle class.
However, the agreement has sparked controversy, particularly surrounding the "double contribution convention," which exempts Indian workers and their employers from paying national insurance in the UK for three years. Critics argue this could undermine British workers, especially as the UK government recently increased national insurance to 15% and lowered the payment threshold.
Conservative leader Kemi Badenoch, who previously served as trade secretary, voiced her concerns, stating, "When Labour negotiates, Britain loses." She highlighted that the ceramics and aluminum industries might suffer due to the deal's terms.
Despite the criticism, the UK government maintains that the agreement will benefit British workers and employers as opportunities in India expand. Trade Minister Douglas Alexander defended the deal, asserting that it would cover only a "specific and limited" group of Indian business people for three years and that no new visa routes were created as part of the agreement.
The deal will also see a significant reduction in tariffs on automotive products, with duties dropping from over 100% to just 10%. This move aims to open the Indian market to British car manufacturers, who are currently grappling with challenges posed by U.S. tariffs on automotive exports.
In addition to whisky and automotive products, the agreement will reduce tariffs on a wide range of goods, including cosmetics, medical devices, and various food products. The UK government anticipates that consumers will benefit from lower prices and a broader selection of products, such as Indian frozen prawns and textiles.
However, environmental groups have raised alarms about the potential influx of cheaper Indian food imports, which may not meet UK farming and environmental standards. Nick Mole, policy manager at the Pesticide Action Network UK, warned that the deal could lead to increased exposure to harmful pesticides, as Indian agricultural practices may differ significantly from UK regulations.
Moreover, the UK-India trade deal comes at a time when the British government is facing scrutiny over its handling of domestic economic issues, particularly following disappointing results in recent local elections. Labour’s loss of the Runcorn by-election and control of Doncaster Council to the resurgent Reform UK party has heightened the stakes for Starmer's administration.
Business groups, including the British Chamber of Commerce, welcomed the agreement as a significant boost for UK exporters, particularly in the face of increasing global trade uncertainty. William Bain, head of trade policy at the chamber, noted that the tariff reductions would relieve pressure on British businesses looking to expand into the Indian market.
The agreement is viewed as a pivotal moment for the UK’s post-Brexit trade strategy, with hopes that it will pave the way for further negotiations with other countries. The UK government estimates that by 2040, the trade deal will add £4.8 billion to the UK economy and increase wages by £2.2 billion annually in the long term.
Despite the optimistic projections, some critics argue that the UK could have secured a better deal as part of the EU, suggesting that the bloc’s collective bargaining power would have yielded more favorable terms. The European Movement UK and Best for Britain have both emphasized that the UK would benefit more from closer ties with the EU, particularly in terms of customs agreements.
As the UK and India embark on this new economic partnership, the coming months will be crucial in determining how the agreement impacts various sectors, from agriculture to manufacturing. The balancing act between opening markets and protecting domestic industries will be a central theme as both nations navigate the complexities of their evolving trade relationship.
In conclusion, the UK-India trade deal represents a significant step forward for both countries, with potential benefits spanning economic growth, job creation, and increased market access. However, the challenges and criticisms surrounding the agreement highlight the need for careful management of its implications on domestic industries and labor markets.
