The recently finalized Free Trade Agreement (FTA) between India and the United Kingdom includes a provision for reduced tariffs on automobiles, but with a limited quota, particularly for electric vehicles (EVs). While the exact figures remain undisclosed, an official indicated that the duty-free quota for British EVs would be capped at a few thousand units.

Under the terms of the FTA, India will reduce import duties on cars and SUVs manufactured in the UK from over 100% to 10%, but this reduction applies only to a specified quota. This substantial reduction in tariffs is expected to significantly lower the prices of high-end British cars in the Indian market. Brands like Jaguar Land Rover, Bentley, and Rolls-Royce are likely to be the primary beneficiaries of this provision. The FTA aims to boost bilateral trade between India and the UK to $120 billion by 2030, doubling the current $60 billion.

The FTA offers several advantages to both countries. For India, 99% of its exports will receive duty-free access to the UK market. India will also reduce import duties on 90% of tariff lines, with 85% becoming completely tariff-free within a decade. This will lead to lower prices for Indian consumers on various goods, including cosmetics, medical devices, and machinery. The agreement also includes advantages for India in service sectors like IT, finance, and education.

For the UK, the FTA provides access to India's growing middle-class consumer base and reduces tariffs on products like whisky, medical devices, and automobiles. The UK government anticipates that the FTA will boost the UK's GDP by £4.8 billion and increase wages by £2.2 billion annually in the long term. The agreement also aims to eliminate trade barriers and enhance the competitiveness of UK exports.

In a related development, India has proposed a trade-off regarding EVs, suggesting unlimited imports of EVs priced above GBP 80,000 from the UK in exchange for a larger export quota of smaller EVs priced below GBP 40,000 from India to the UK. This proposal seeks to benefit automakers in both countries and potentially influence trade discussions with the United States. The FTA is projected to enhance bilateral trade by £25.5 billion, whilst boosting UK GDP by £4.8 billion and increasing wages by £2.2 billion annually in the long term.