After nearly three and a half years of extensive negotiations, India and the United Kingdom (UK) announced the completion of talks for a free trade agreement (FTA) on Tuesday. This deal is expected to strengthen strategic and economic relations between the fifth- and sixth-largest global economies amidst ongoing geopolitical uncertainties and trade disputes.

Once implemented, the FTA could reduce the cost of importing products like whisky, gin, automobiles, medical devices, electrical machinery, cosmetics, soft drinks, chocolates, and lamb for India. Additionally, it will enhance the competitiveness of Indian exports to the UK in sectors such as textiles, toys, leather, marine products, footwear, and gems and jewelry. However, sensitive items like dairy products, apples, and cheese have been excluded from duty reductions to protect Indian farmers.

In a significant achievement for India, both nations also finalized a social security agreement, granting Indian skilled workers in the UK a three-year exemption from social security payments. This long-standing Indian demand is expected to benefit over 60,000 IT professionals, saving them about 20% of their salaries. The total benefit to Indian companies and employees is projected to exceed ₹4,000 crore.

The negotiated deal is now set to undergo legal review and approval from both governments before being signed. However, the bilateral investment treaty (BIT) remains unresolved, with ongoing disagreements over dispute resolution timelines and tax inclusion. For the UK, this FTA marks the largest and most significant post-Brexit trade deal, as it seeks to establish a strong trade relationship with India. For India, this is the most comprehensive agreement with any developed nation so far. The timing is critical, as discussions for a trade deal with the US are also intensifying.

Prime Minister Modi hailed the deal as a historic achievement, which, alongside the social security pact, will deepen the bilateral strategic partnership and foster trade, investment, job creation, and innovation. UK Prime Minister Starmer also expressed his satisfaction with the deal, calling it beneficial for British businesses, workers, and consumers. The deal will result in tariff reductions on 99% of UK products, covering nearly all trade value, making Indian goods more competitive in the UK market. Meanwhile, India will cut tariffs on 90% of goods, with 85% of these being tariff-free within a decade. Key reductions include lowering import duties on whisky and gin from 150% to 75%, with further reductions to 40% by the tenth year. Automotive tariffs will drop from over 100% to 10% under a quota.

While details on visa liberalization for skilled workers remain unclear, the agreement is expected to improve access for Indian professionals in IT, financial services, education, and other sectors. Both governments project that bilateral trade, currently valued at $60 billion, could double by 2030. Commerce and Industry Minister Piyush Goyal emphasized that this deal sets a new standard for ambitious trade relations between two large economies, benefiting Indian farmers, workers, MSMEs, and startups, and moving India closer to becoming a global economic leader. The total trade between India and the UK reached $21.33 billion in 2024-25, with India’s exports growing by 13.3% year-on-year.

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