The long-awaited trade deal between the UK and India has been agreed following years of negotiations, the government has announced.

The Department for Business and Trade (DBT) confirmed yesterday (6 May) that the deal will include cuts on 90% of tariff lines for UK exports to India, with 85% of these “becoming fully tariff-free within a decade”.

These numbers include a halving of the duty on whisky and gin exports to India, which will go from 150% to 75% then to 40% at year 10 of the deal. Car tariffs will fall from 100% to 10% with a quota.

Duties down

Tariffs will be slashed on a range of other goods, including “cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate and biscuits”.

In return, the UK has promised to lower tariffs on clothes and food products from India.

Bilateral trade is set to increase by £25.5bn according to government calculations, with a boost to UK GDP of £4.8bn and an increase in domestic wages of £2.2bn per year “in the long run”.

Mobility and social security

An Indian government press release described the deal as one that would “boost jobs, exports and national growth”, with “99% [of] Indian exports to benefit from zero duty”.

It also described as a “huge win” the “three-years exemption from social security payments for Indian employees working in the UK” secured as part of the deal, which it says “will make Indian service providers significantly more competitive in the UK” and which marks an “unprecedented achievement”.

The deal also “eases mobility for professionals” including “intra-corporate transferees; partners and dependent children of intra-corporate transferees with right to work; and independent professionals like yoga instructors, musicians and chefs”.

‘The best deal India has agreed’

The completed deal follows a final round of negotiations between business and trade secretary Jonathan Reynolds and Indian commerce minister Piyush Goyal.

The agreement is “the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU”, as well as “the best deal India has ever agreed”, according to DBT.

India is forecast to become the world’s third-largest economy within the next three years, the government notes, and the deal gives UK firms “a competitive edge over international competitors” in the country’s market.

The Chartered Institute perspective

Marco Forgione, director general of the Chartered Institute of Export & International Trade, said the agreement "is welcome news to our members and the wider business community".

"It is a strong example," he added, "of what can be done when good will and mutual benefits between trading partners are clear.

"With UK industries, such as automotive, currently feeling the challenges of the US tariffs, this deal comes at an opportune moment for a range of goods and services industries. 

"With the deal due to increase bilateral trade between the UK and India by £25.5bn, there are significant gains to be seized upon by British businesses right across the UK’s nations and regions. The benefits of our world-leading services businesses now having access to India’s £1.5tn services sector, and one that is growing at nearly 8% a year, is not to be underestimated. The Chartered Institute stands ready to support businesses in understanding the benefits of the deal, ahead of it entering into force.”

Background

A deal with India had been long sought after by the UK. Government sources told business leaders in April that both sides were “nearly there” on a deal.

Three successive Conservative administrations had talked up the possibility of reaching an agreement, including then-prime minister Boris Johnson’s promise of a ‘deal by Diwali’ in 2023, as part of a Brexit bonus.

David Henig, UK director at the European Centre for International Political Economy, said that the treaty was “very much a tariff reduction deal, with no mention of data or financial services.”

“That's always been the most realistic landing zone, talk of incredible levels of ambition always seemed unwise.”

‘Delivering billions’ for economy

Reynolds said that the deal means the government is “delivering billions for the UK economy and wages every year and unlocking growth in every corner of the country, from advanced manufacturing in the North East to whisky distilleries in Scotland”.

“In times of global uncertainty, a pragmatic approach to global trade that provides businesses and consumers with stability is more important than ever.”

PM, Sir Keir Starmer, said the deal comes “in a new era for trade and the economy”:

“Through this government’s stable and pragmatic leadership, the UK has become an attractive place to do business. Today we have agreed a landmark deal with India - one of the fastest growing economies in the world, which will grow the economy and deliver for British people and business.”