Prime Minister Narendra Modi has departed for the United Kingdom for a significant visit focused on strengthening bilateral ties and signing a landmark Free Trade Agreement (FTA). The FTA, officially termed the Comprehensive Economic and Trade Agreement, is the centerpiece of the visit and has been under negotiation for three years. The agreement was approved by the Indian cabinet on Tuesday.
The FTA aims to boost trade between the two nations by removing numerous barriers and granting greater market access to each country. It is expected to double bilateral trade to $120 billion by 2030. Under the agreement, India will reduce tariffs on British whisky, cars, and certain food items. In return, the UK will offer duty-free access to Indian textiles and electric vehicles. The UK will eliminate tariffs on 99% of Indian exports, including textiles, leather, and auto parts. Reductions will be seen on 90% of its tariff lines.
The FTA is expected to have a positive impact on manufacturing across labor and technology-intensive sectors in India. It opens up export opportunities for sectors such as textiles, marine products, leather, footwear, sports goods, gems and jewellery, engineering goods, auto parts, and organic chemicals. The reduction of non-tariff barriers is expected to ensure a free flow of goods and services. British consumers are expected to benefit from lower prices on Indian garments, footwear, and food products. UK-based firms such as Diageo (Scotch whisky) and British luxury carmakers like Aston Martin and Jaguar Land Rover are expected to benefit significantly from improved access to India's growing consumer market.
Vikram Misri, India's foreign secretary, noted the importance of the agreement, stating that legal vetting was nearing completion before Modi's trip. Trade Minister Piyush Goyal is accompanying Modi for the formal signing.
PM Modi is scheduled to meet with UK Prime Minister Keir Starmer to discuss trade, energy, security, health, and education issues. He will also meet with King Charles III. Starmer will host Modi at Chequers, the British prime minister's official country residence. Discussions are likely to include the Russia-Ukraine war. India is also expected to raise concerns related to Khalistani extremism and press for the return of economic fugitives.
Bilateral trade between India and the UK reached $55 billion in 2023/24. The UK is the sixth-largest investor in India, with cumulative investments of nearly $36 billion. There are approximately 1,000 Indian companies in the UK, employing nearly 100,000 people and generating over $91 billion in revenue.
The FTA includes a social security agreement exempting temporary Indian workers in the UK from dual contributions for three years, reducing operational costs for SMEs sending employees abroad. The two countries have also concluded negotiations for the Double Contribution Convention Agreement, or social security pact. Talks for the bilateral investment treaty (BIT) are ongoing.
Following the UK visit, PM Modi will travel to the Maldives as the guest of honor for the island nation's Independence Day celebrations. He will meet with President Mohamed Muizzu to strengthen bilateral ties and review progress on the India-Maldives Joint Vision for a Comprehensive Economic and Maritime Security Partnership.
