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The UK and India announced on Tuesday a “landmark” trade agreement that includes concessions to Delhi on access to the UK’s job market in exchange for a major cut in India’s tariffs on whiskey and car exports.
The contract would be considerably cheaper for an Indian employer’s UK business to exempt Indian staff from paying national insurance to Indian staff who will migrate for up to three years, and move people to the UK.
Indian whiskey and gin tariffs will be halved from 150% to 75%, falling to 40% by the tenth year of the transaction. Car duties will decrease from over 100% subject to quota to 10%.
Talks over the deal, which has been dragged over for three years, have accelerated last month after President Donald Trump imposed global tariffs.
“In the historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial free trade agreement,” Indian Prime Minister Narendra Modi posted on X after a conversation with a priority candidate for the UK counterpart keel.
Modi added that the deal “helps catalyzing trade, investment, growth, job creation and innovation in both our economy,” adding that the bounty would soon be coming to India.
The British minister hopes that in the coming days it will become a prelude to signing an agreement with Trump, ahead of the EU contract to begin improving bilateral trade links at the summit on May 19th.
The UK government estimates that Indian transactions will increase the UK’s economy by 0.1% by 2040, but argued that reforms would not involve changes to the visa system or broader immigration strategy as the UK and the Conservatives were working hard on the issue.
British authorities said Indian employees moving to the UK still remain subject to visa pay thresholds and will have to pay NHS surcharges for migrant workers despite national insurance waiver.
Harriet Baldwindame, the shadow minister for business and trade in the Conservative Party, told Parliament that “it appears to be subsidizing Indian labor while robbing British workers.”
Trade Minister Douglas Alexander replied that the national insurance portion of the contract is “mutual” and that “it will benefit British workers and their employers as opportunities within India grow.
The priority said the deal was a response to a “new era of trade and economy” and was a sign that his government, which was attacked last week in local elections, had been delivering for the British people.
“Today, we have agreed to a groundbreaking deal with India, one of the fastest growing economies in the world.
The UK government said that reducing tariffs on Indian products will help UK shoppers provide “lower prices and more choices” in areas such as clothing, footwear and foods such as shrimp.
India maintains dairy tariffs, while the UK maintains restrictions on some agricultural products, such as milled rice.
Although details are not available yet, the trade agreement is expected to be one of the most important new agreements the UK has signed since leaving the EU in unison with Australia and Japan.
It could also be one of the most important signings by India under the Modi government, which has signed the FTA with the United Arab Emirates, Australia and the European Free Trade Association over the past decade.
Based on trade in 2022, the contract includes India cutting tariffs of more than £400 million a year when the contract comes into effect, rising to around £900 million in 10 years, the UK government said.
It added that it hopes that the transaction will increase bilateral trade by £25.5 billion and UK GDP by £4.8 billion over the long term. Bilateral trade between the UK and India was £42.6 billion in 2024, while the UK’s GDP was £285.1 billion.
The announcement says the transaction will bring “market certainty” to UK services exports, currently worth £500 million a year. However, the English and Welsh Legal Associations said the transaction could not include legal services and was a “missed opportunity.”
According to the Scotch Whiskey Association, India was the second-largest export market for Scotch whiskey in 2023 and welcomed the deal as a “groundbreaking moment” for the industry. India is the third largest automobile market after the US and China, but its business division says they are controlled by “quotas.”
Sam Lowe, trade lead at Consultancy Flint Global, said that being one of the first countries to enter into a trade deal with India was a victory for the UK, but that the ultimate profits will only become clear over time.
Additional Reports by Amy Bollet
