Explained: Why India-UK free trade agreement is a big deal for both nations

India Today

India and the United Kingdom have formally sealed a Comprehensive Economic and Trade Agreement, a deal described as the "biggest, most economically significant trade deal that the UK has made since leaving the EU."

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00:00This is the biggest and most economically significant trade deal that the UK has made since leaving the EU.

00:07Two and a half months after India and the United Kingdom finalized a free trade agreement,

00:12Prime Minister Narendra Modi has formally sealed the deal with his British counterpart, Kheer Stama.

00:17It is a deal that will bring huge benefits to the EU.

00:47Both of our countries, boosting wages, raising living standards and putting more money in the pockets of working people.

00:57It is good for jobs, it is good for business, cutting tariffs and making trade cheaper, quicker and easier.

01:05The pact, formally called a Comprehensive Economic and Trade Agreement,

01:10is expected to come into force after illegal clearances from the British Parliament,

01:14which is expected in a few months from now.

01:15The Union cabinet in India has already okayed the deal, so we have done our bit.

01:20Talks over a free trade deal between India and Britain has been happening for the last many years.

01:25It was initially launched in January 2022.

01:28This trade deal finalized after 14 rounds of grueling talks,

01:33one Indian general election and four UK Prime Ministers,

01:36is expected to boost bilateral trade from $57 billion in 2024 to a whopping $120 billion by 2030 in six years' time.

01:47So what does India get from this deal?

01:49Well, once it's made into a law, 99% of Indian products will receive duty-free access to the UK market,

01:56covering nearly all of India's current trade value.

01:59So we're talking about clothes, footwear, food products, including frozen prawns.

02:05With a zero tariff on textiles and apparel, Indian exports will get the same advantage as countries like Bangladesh and Vietnam.

02:13sectors that are likely to benefit from the free trade agreement include textiles, footwear, auto components, gems and jewellery,

02:25furniture, sporting goods, chemicals and machinery.

02:29Many of these currently face tariffs somewhere between 4 to 16% in the UK.

02:34Indian manufacturers of electric and hybrid vehicles will also gain preferential access under a new quota system as per this deal.

02:41But it's also equally beneficial for the United Kingdom.

02:45This agreement reduces 90% of tariffs on British exports to India.

02:51In the automobile sector, tariffs on UK-made cars currently exceeding 100% will be reduced to 10% under a quota system.

02:59So big, big difference there.

03:01As far as other goods go, tariff cuts will also take place in a range of UK products.

03:06Cosmetics, cosmetics, salmon, chocolates, biscuits, medical devices and there's of course been a lot of talk on alcohol beverages.

03:15Import duties on scotch, whisky and gin will fall from 150% to 75% immediately to 40% over 10 years time as well.

03:25Some of the clauses have triggered worries, however, in the Indian industry.

03:29There is this fear that, yes, and it's a very well-founded fear, that there could be cheap imports coming in

03:37and these will harm the premium and luxury end of Indian whiskeys and Indian gins and Indian rums and vodkas,

03:47which are gaining a substantial foothold and a year-on-year growth.

03:52British firms, in significant shifts, will now have access to India's government procurement portal,

03:58which is a rare exception to India's usual make-in-India priority.

04:03So there have been questions about that.

04:05The agreement also liberalises 36 service sectors, IT, research and development, healthcare, engineering, education.

04:12It allows easier labour mobility, introduces annual additional visas for Indian professionals,

04:19particularly in tech and healthcare.

04:21Now, the free trade agreement also includes rather progressive commitments in the services sector and mobility.

04:28The UK will offer temporary access for Indian yoga instructors, for chefs, for musicians and other contractual service providers.

04:37Besides that, Indian professionals posted in the UK will be exempt from paying social security contributions for up to three years

04:43and that could potentially save 4,000 crore rupees annually.

04:49So at a time when countries are trying to navigate rather turbulent effects of US President Trump's tariff upheaval,

04:55this pact comes as a great economic boost for both India and equally for the United Kingdom.

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