UK and India strike major trade deal following years of negotiations

The UK and India have signed a major trade deal, with tariffs on goods such as cosmetics, salmon and whisky set to be slashed in an agreement hailed as "the biggest and most economically significant bilateral trade deal the UK has done" since leaving the European Union (EU).

According to a 6 May announcement from the UK government, the agreement will provide a major boost to the UK economy in the months and years ahead. "The deal is expected to increase bilateral trade by £25.5bn, UK GDP by £4.8bn and wages by £2.2bn each year in the long run," it says.

Finalised during talks in London last week – marking the end of negotiations that kicked off in January 2022 under the Conservative government of former UK Prime Minister Boris Johnson – the deal will impact a wide and varied range of UK products. Tariffs on whisky and gin will be cut from 150% to 75%, falling to 40% by the agreement's tenth year. Automotive tariffs will also be reduced, from more than 100% today to 10% under a quota.  

"Other goods with reduced tariffs, which can open markets and make trade cheaper for businesses and Indian consumers, include cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate and biscuits," the UK government says.

The deal – which will enter into force once both countries complete their ratification processes – also pledges to protect the copyright of those working in the UK's creative industries for at least 60 years.

The UK, which officially left the EU in January 2020, is bullish about its new pact with India, describing it as "a huge economic win for the UK" and "the best deal India has ever agreed."

A readout of a call between Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer, released by the Indian government's Press Information Bureau on 6 May, strikes a similar tone.

"The conclusion of a balanced, equitable and ambitious FTA [free trade agreement], covering trade in goods and services, is expected to significantly enhance bilateral trade, generate new avenues for employment, raise living standards and improve the overall well-being of citizens in both countries," it says.

A 'transformational' deal

Those commenting on the agreement and its significance include Mark Kent, chief executive of the Scotch Whisky Association.

"The reduction of the current 150% tariff on Scotch whisky will be transformational for the industry. The deal has the potential to increase Scotch whisky exports to India by £1bn over the next five years and create 1,200 jobs across the UK," he says.

Kent adds that the deal will also give consumers in India far greater choice of brands, as more small- and medium-sized Scotch whisky producers have the opportunity to enter the market.

Richard Heald, chair of the UK India Business Council, says the agreement "marks a significant milestone in the deepening of economic and strategic ties between our two nations."

"It matters when the fifth and sixth largest economies in the world reach a trade agreement," Heald adds.

"Such an agreement is illustrative of the positive momentum in the UK-India relationship, the commitment and ambition of both governments, and the opportunities for greater trade, investment and collaboration between our countries."

A need for pragmatism?

The UK-India trade deal comes at a time when international trade has been rocked by geopolitical tensions and the US' decision to impose sweeping tariffs on economies large and small.

Although US President Donald Trump has announced a 90-day pause on his plans for tariffs, a 10% "baseline" levy still remains in place, while China has been slapped with an effective 145% tariff on its goods.

On 22 April, Trump said this "would come down substantially, but it won't be zero." For its part, China has hit US products with a 125% retaliatory tariff.

In a statement issued alongside the UK government's announcement, Jonathan Reynolds, the UK's business and trade secretary, acknowledges the volatility currently facing businesses.

"In times of global uncertainty, a pragmatic approach to global trade that provides businesses and consumers with stability is more important than ever," he says.