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Great Britain and India agreed on Tuesday a “historic” free trade agreement, which, according to London, would increase the British economy by 4.8 billion pounds in the long term, with major reductions in Indian prices on British whiskey and cars.
The talks on the agreement, which dragged for three years, accelerated following the taxation of world prices by US President Donald Trump last month with London and New Delhi wishing to seal the closer trade links.
“In a historic stage, India and the United Kingdom successfully concluded an ambitious and mutually beneficial free trade agreement,” said Indian Prime Minister Narendra Moda after a conversation with his British counterpart Sir Keir Starmer.
Modi added that the agreement “would help catalyze trade, investment, growth, job creation and innovation in our economies” and that Starmer would soon go to India.
British ministers hope that the India trade agreement could be a prelude to the signing of an agreement with Trump in the coming days, before an agreement with the EU to start improving bilateral trade ties at a summit on May 19.
While Great Britain has obtained lower prices for exports to India, especially on whiskey, gin and cars, New Delhi wanted better terms to help its professional workers take jobs in the IT sector, as well as lower textile prices.
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Starmer said the agreement was an answer to “a new era for trade and the economy” and was a sign that his government, which was beaten in the local elections last week, delivered the British public.
“Today, we have concluded a historic agreement with India, one of the fastest economies in the world, which will grow the economy and deliver for the British and business,” he said.
The prices of whiskey and gin will be divided by two from 150% to 75% before falling to 40% by the tenth year of the agreement. Automobile rates will drop from more than 100% to 10%, subject to a quota.
The British government has said that prices for Indian products would help British buyers “cheaper and more choice” in areas such as clothing, shoes and food products such as shrimp.
Although all the details are not yet available, the commercial pact should be one of the most important new agreements signed by Great Britain since it left the EU, after agreement with Australia and Japan.
It is also likely to be one of the largest signed by India under the government of Modi, which signed the ALF with the United Arab Emirates, Australia and the European Free Trade Association in the last decade.
Based on the trade of 2022, the agreement would imply that India reduces prices worth more than 400 million pounds sterling per year when the agreement has entered into force, reaching approximately 900 million pounds Sterling after 10 years, said the British government.
He added that he expected the agreement to increase bilateral trade by 25.5 billion pounds sterling and the UK GDP by 4.8 billion long-term Sterling pounds. The bilateral trade between the United Kingdom and India was 42.6 billion sterling pounds in 2024, while the GDP of the United Kingdom was 2,851 billion pounds Sterling.
The announcement said that the agreement would bring a “market certainty” to exports from British services worth 500 billion pounds sterling per year. However, the Barteau of England and Wales said that the agreement had not included legal services and was a “missed opportunity”.
The British government insisted that the trade agreement did not imply modifications to its visa system or the wider immigration strategy, at a time when Reform UK campaigned hard on the issue.
British government officials said the agreement would make it as simple as possible for Indian companies to move professional employees to the United Kingdom under short-term transfers.
Indian employees will not have to pay national insurance contributions when they are on intersocated short-term transfers in the United Kingdom, but will always be subject to the same salary thresholds and will have to pay the NHS supplement for immigrant workers.
India will maintain the prices in place for dairy products, while the United Kingdom maintains the restrictions in place on certain agricultural products such as strawberry rice.
India was the second largest export market for Scotch Whiskey in volume in 2023, according to the Scotch Whiskey Association, which praised the agreement as a “historic moment” for the industry. India is the third car market after the United States and China, although the business department has declared that they would be governed by a “quota”, without developing.
Sam Lowe, leader of Consultancy Flint Global, said that being among the first countries to conclude a free trade agreement with India was a victory for the United Kingdom, but that the ultimate advantages will only become clear over time.
Additional reports by Amy Borrett
