India-UK deal: A truly historic convergence on trade

Historically, the relationship between both countries has been predicated on trade, with the passage of time determining the necessary changes required to reflect shifting terms of trade. After East India Company lost its trade monopoly 17-18 decades ago, British exporters had easy access to the Indian market, while we faced barriers; the power equation has changed dramatically since 1947. 

Also Read: Mint Quick Edit | An India-UK FTA at long last!

The new trade pact, a clear win-win, is a historic achievement for both nations, especially the speed with which it was concluded after the leaders of both met on the sidelines of the G20 summit in November 2024 and agreed to accelerate talks. Negotiations had been stretched out over many years, with multiple switches of UK leadership, but this agreement is unique because it finally took a left-of-centre government in London and rightist one in New Delhi to clinch a deal. 

This urgency could perhaps be attributed to the uncertainty created by US President Donald Trump’s dismantling of global trade; in fact, UK Prime Minister Keir Starmer commented that, post-Brexit, the India-UK FTA was London’s most significant trade deal.

The FTA seems designed to push the envelope without harming large pockets of special interests. Apart from tariff cuts on a wide swathe of goods on both sides, London also seems to be offering India concessions for accessing the UK job market. 

Also Read: The India-UK free trade deal is a game-changer for bilateral trade relations

On its part, New Delhi has promised to halve duties on whisky and gin to 75%, a rate slated to drop further to 40% by 2035. Tariffs on high-end cars, similarly, will be slashed from 100% to 10%, subject to a quota. Duties will be slashed across a range of products: from cosmetics to medical devices and from advanced machinery to lamb. 

In return, the FTA will see India gain from the UK’s elimination of import duties on 99% of its tariff lines, covering almost all the trade value. In addition, the FTA is designed to benefit Indian exporters from labour- and technology- intensive sectors—such as textiles, leather, gems and jewellery, engineering products, auto parts and organic chemicals. 

A critical component is a UK commitment on trade in services and the movement of professionals. The cherry on top is that Indians working in the UK for Indian employers won’t have to pay for its national insurance; social security has long been a contentious point with the US too.

Also Read: India could learn much from the complaints of its trade partners

The FTA is expected to double India-UK trade, placed at around $54 billion last year, by 2030. The FTA is also being touted as a model for future FTAs. However, gaps between the draft agreement and the final text could still arise. First, both sides have to finalize its legal text, which can present some challenges. Thereafter, the pact will be put under the scrutiny of multiple authorities in the UK, such as its independent Trade and Agriculture Commission; the legal text will then need to be ratified by the parliaments of both nations. 

Here is an example of what could pose a hurdle: a technical note of the UK government estimates that its exports will increase by nearly 60%, while its imports from India will rise by 25%. But this is a preliminary and imprecise estimate, probably designed to assuage domestic pressure groups. The FTA is in everybody’s interest and should not be held hostage by any interest group.