India-UK Trade Deal: Why It Is 'Historic Milestone' For India?

India and the United Kingdom have announced the successful conclusion of a broad Free Trade Agreement (FTA) that removes tariffs on a majority of goods and services traded between the two nations. The deal is being hailed as a significant step in strengthening the bilateral partnership and could pave the way for similar agreements between India and other major economies, including the United States.

On Tuesday, Prime Minister Narendra Modi and UK Prime Minister Keir Starmer held a telephone conversation to mark the occasion. Both leaders welcomed the agreement, describing it as an ambitious and mutually beneficial milestone. They also acknowledged the successful conclusion of the Double Contribution Convention, which will further support economic cooperation.

“Delighted to speak with my friend, PM Keir Starmer. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention. These landmark agreements will further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies. I look forward to welcoming PM Starmer to India soon."

India-UK Trade Deal: What It Means for Both Countries

The trade relationship between the UK and India has been growing rapidly over the years. By the middle of 2024, their total trade in goods and services had increased by 10% to reach £42 billion, up from £24.1 billion in 2019.

This growth makes it clear that both nations are benefiting from stronger economic ties. As a result, finalising their Free Trade Agreement (FTA) has become even more important.

Also Read: BIG BREAKING: India-UK Seal Free Trade Agreement, Announces PM Modi Says 'Historic Milestone'

What is an FTA?

An FTA, or Free Trade Agreement, is a deal between two or more countries to reduce or remove tariffs (taxes on imports) on most goods they trade. It also works to remove other barriers that make trading difficult. This allows goods, services, and investments to flow more freely between the countries involved, making trade easier and more efficient.

What Does the FTA Mean for India?

In the case of India, the FTA could have a big impact on its trade with the UK. In 2024, India's exports of goods to the UK were worth $12.9 billion. However, because over half of India's products already enter the UK with little or no tariffs, the FTA may not make a huge difference for many goods.

For instance, Indian products like petroleum, medicines, diamonds, and machine parts already have little or no tariff in the UK. These products are worth about $6.8 billion, so there won't be much change here.

However, the FTA will benefit Indian goods worth about $6.1 billion. This includes products like textiles, apparel, footwear, carpets, cars, marine products, and fruits like grapes and mangoes. These items currently face moderate tariffs in the UK, and the FTA will help reduce those costs, making Indian goods more competitive in the UK market.

What About the UK?

For the UK, the FTA is also expected to bring benefits, especially for products that are currently subject to high tariffs in India. In 2024, India imported $8.4 billion worth of goods from the UK. However, most of these imports are subject to high tariffs. For example, the tariff on cars is 100%, and on whisky and wines, it’s 150%.

Through the FTA, these products will face lower tariffs, making UK goods like cars, precious metals, machinery, and alcohol more affordable in India. This will open up new opportunities for UK businesses to sell their products in India.