The recently signed India-UK Free Trade Agreement (FTA) is expected to significantly boost bilateral trade and offer numerous economic advantages to both nations. Formalized on Thursday during Prime Minister Narendra Modi's visit to the UK, the deal has been in negotiation for three years and is projected to increase annual trade between the two economies by $34 billion. The agreement was signed by India's Commerce Minister Piyush Goyal and the UK's Secretary of State for Business and Trade, Jonathan Reynolds.

Key Benefits for India

• Increased Market Access: The FTA grants 99% of Indian exports duty-free access to the UK market. This will boost key labor-intensive sectors such as textiles, leather, gems and jewellery, seafood, engineering goods, and processed foods. These sectors will now enjoy near-zero duty access, enhancing their competitiveness.
• Tariff Reductions: India will reduce tariffs on 90% of UK products, with the average levy dropping from 15% to 3%. Tariffs on British goods like whisky, cars, and electric vehicles will see significant reductions. For example, the import duty on whisky will immediately fall from 150% to 75% and then gradually to 40% over 10 years.
• Boost to Specific Sectors:
  • Leather: India's leather sector is projected to gain an additional 5% market share in the UK within the next two years.
  • Engineering and Electronics: Exports from these sectors could double by 2030.
  • Chemicals: Chemical exports may increase by 30-40% in the next fiscal year.
  • Gems and Jewellery: Exports are expected to double in the next three years from the current $941 million.
  • Software Services: Exports are estimated to increase by around 20% annually once the trade pact is in effect.
• Opportunities for Professionals: Indian professionals will gain easier access to work in the UK, with 35 sectors opened up for Indian talent to work for up to two years without needing a local office presence. This move could benefit over 60,000 IT professionals each year.
• Cheaper Goods for Consumers: Indians will have access to British products such as soft drinks, cosmetics, chocolates, biscuits, lamb, salmon, and cars at cheaper costs due to the reduction in tariffs.

Benefits for the UK

• Tariff Reductions: The deal will lead to major cuts in Indian tariffs, with reductions secured on 90% of tariff lines. In 10 years, 85% of these will be exempt from tariffs.
• Access to Public Procurement: UK businesses will gain expanded access to public procurement opportunities in India and can bid on non-sensitive government tenders valued above Rs 2 billion. This potentially opens access to 40,000 tenders each year, collectively worth around Rs 4.09 lakh crore.
• Job Creation: The UK expects to create over 2,200 jobs as a direct result of the trade agreement.
• Increased Exports: UK officials estimate the deal will increase UK exports to India by almost 60% over the long term.

Overall Impact

The India-UK FTA is a significant milestone that promises to reshape the economic relationship between the two countries. By reducing tariffs, enhancing market access, and promoting investment, the agreement is expected to drive economic growth, create jobs, and foster innovation in both India and the UK. The deal also includes provisions to reduce levies on spirits, with whisky and gin duties decreasing to 75% initially, then to 40% by the tenth year. Both governments have hailed the agreement as a roadmap for shared prosperity, with the goal of doubling bilateral trade by 2030.