UK Signs Trade Deal with India

The Department for Business & Trade have today announced the completion of a trade agreement with India. Only last week Indian Minister of Commerce and Industry, Piyush Goyal, was in the UK taking part in negotiations and discussions with UK counterparts.  Following his departure there were rumours of trade agreement close to being signed.   

Today, over three-years since the launch of UK-India negotiations, we now have a trade agreement over the line.   

In their press release, the Department for Business & Trade stated that the “deal will slash tariffs on key products such as whisky, cosmetics and medical devices” and that they have secured a “reduction on 90% of tariff lines”.  

In terms of economic impact, it is estimated that the agreement will add £4.8bn to the UK economy and see a rise of £2.2bn in wages each year.   

UK and India Sign Trade Agreement

Tariff Reduction: 

As mentioned above, 90% of commodity codes will see a reduction in customs duty, while 64% will be eligible for tariff-free trade as soon as the agreement comes into effect.  Of these products, 85% will benefit from a 0% preferential tariff rate within a decade whereas others, such as whisky and gin, will see further reductions during the 10 year period (whisky and gin tariffs will be halved from 150% to 75% before being reduced to 40% by year 10 of the deal).

In terms of volume of trade, 92% of goods imported into India from the UK will see a tariff reduction. Based on this trade alone, this amounts to India cutting tariffs worth over £400million, which will reach £900m after 10 years.

However, as you would expect with reductions impacting 90% of tariff codes, it is not only whisky and gin manufacturers that will benefit.  A wide-range of sectors will witness at least some reduction in their tariff rates including food & drink, automotive, cosmetics, aerospace, medical devices, and electrical machinery.  

Not Just Goods & Tariffs: 

As well as the news regarding tariffs, which will be a massive boost for a lot of businesses, the trade agreement also includes: 

• Unprecedented access to Indian procurement for the clean energy sector 

• Copyright protections for the creative sector 

• Access to the Indian market for the UK’s financial and business services sectors 

• India agreeing to their “best ever commitments” on digital trade 

  
  

Trade Levels & The Opportunity: 

India is forecasted to become the 3rd largest global economy within three years and already have the highest global population, making it easily the UK's bilateral agreement with the largest potential.  

The latest trade and investment statistics show that the total trade between the UK and India rose to £42.6billion in the fours quarters to the end of Q4 2024.  India is the UK’s 11th largest export market (4th largest outside of the EU) with total exports amassing to £17.1bn.  

What the Prime Minister had to say: 

In the Press Release that announced the agreement, the Prime Minister stated that: 

“Through this government’s stable and pragmatic leadership, the UK has become an attractive place to do business.  Today we have agreed 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.  

“Strengthening our alliances and reducing trade barrier with economies around the world is part of our Plan for Change to deliver a stronger and more secure economy here at home.” 

Next Steps: 

The trade agreement will have to go through the relevant ratification steps in both the UK and India before it enters into force.   Within the UK, this includes scrutiny from the Trade and Agriculture Commission, the publication of Government report under S.42 Agriculture Act 2020, parliamentary scrutiny and, finally, the passing of the legislation necessary to implement the agreement.

As this process can take up to a year, the trade agreement will not be available for businesses to benefit from for a little while longer.  However, after such a longer wait for an agreement, and the rise in unpredictability with the U.S., this announcement will certainly be a timely lift for international businesses.