In a historic move aimed at strengthening economic ties, the United Kingdom and India have finalized a free trade agreement expected to significantly increase trade between the two nations. The deal, signed on 6 May, marks the culmination of negotiations that began in 2022 between the world’s fifth and sixth largest economies.
Major Tariff Cuts and New Market Access
Under the agreement, India—known for having some of the highest import tariffs globally—has committed to cutting tariffs on 90% of UK exports, with 85% of British goods becoming tariff-free within a decade. Tariff reductions will span across a wide range of sectors, including whisky, electrical machinery, aerospace, medical devices, and food products like chocolate, lamb, and salmon.
One of the most notable shifts will be in the spirits sector: Indian tariffs on whisky and gin, currently at 150%, will drop to 75% immediately and decline further to 40% within 10 years. This move is expected to provide a major boost for Scotland’s whisky industry by making their exports far more competitive in India—the largest whisky market in the world.
Automotive tariffs will also see a dramatic cut, falling from over 100% to just 10%, making British car exports significantly more affordable in the Indian market.
India’s Gains: Access and Exports
The UK has agreed to remove tariffs on 99% of Indian exports, helping key sectors such as textiles, jewellery, auto components, and toys gain easier entry into the British market. The removal of textile duties, in particular, will benefit India’s vast clothing industry.
Although some areas such as legal services were excluded, British firms will gain better access to compete for service contracts in India—particularly in finance and tech—creating new openings in one of the world’s fastest-growing service markets.
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Economic Impact and Strategic Significance
According to the UK government, this is its most economically significant trade agreement since leaving the European Union, and its third-largest deal overall—following agreements with Australia and Japan. Britain now holds trade deals or agreements in principle with approximately 70 countries.
In 2024, India was the UK’s 11th largest trading partner, with bilateral trade in goods and services reaching nearly $57 billion. The UK had an £8.4 billion trade deficit with India at the end of that year. However, the new deal is projected to increase annual bilateral trade by $34 billion by 2040 and boost the UK economy by around $6.4 billion—modest relative to its total GDP of $3.8 trillion but still significant.
Viraj Mehta, Head of Regional Agenda for India and South Asia at the World Economic Forum, emphasized the broader importance of the agreement:
“In a global environment of rising trade tensions, the UK-India deal highlights the critical role of international partnerships for shared progress and prosperity.”
A Gateway to Growth
With over 1.4 billion people and a rapidly expanding middle class, India represents a vast and growing market for British exporters. The deal is expected to open new customer bases and create jobs in both countries.
Though it may take up to a year for the agreement to come into full effect, its long-term impact could redefine the economic relationship between the UK and India for decades to come.