India, Britain seal trade deal to bring down tariffs, barriers; keep dairy out

Hindustan Times

7 days ago

NEW DELHI: India and Britain on Thursday signed a trade deal that is expected to boost two-way commerce by $35 billion in the long run, cut tariffs on goods ranging from textiles to whisky and enhance market access, as Prime Minister Narendra Modi and his UK counterpart Keir Starmer unveiled the Vision 2035 strategy to drive collaboration in defence, technology, climate and migration. Britain's Prime Minister Keir Starmer and Prime Minister Narendra Modi shake hands after Britain's secretary of state for business and trade, Jonathan Reynolds and India's commerce minister Piyush Goyal, signed a free trade agreement at Chequers near Aylesbury, England on July 24 (via REUTERS)
The two sides also unveiled plans to negotiate a Double Contribution Convention (DCC) to give a fillip to the services sector, especially finance and technology, by exempting employers of Indian workers from paying social security contributions in the UK for three years, and a Defence Industrial Roadmap for closer cooperation on military hardware. The DCC will come into force alongside the trade deal.
India and Britain finalised the Comprehensive Economic and Trade Agreement in May after more than three years of negotiations, and the pact was signed by commerce minister Piyush Goyal and his UK counterpart Jonathan Reynolds during Modi's visit to Britain. The two sides gave a push to the negotiations amid economic turmoil unleashed by US President Donald Trump's tariff policies to overcome long-standing differences on issues such as levies on British alcohol and automobiles, and access to India's markets.
Modi described the deal as 'not just an economic partnership, but a plan for shared prosperity' that will benefit India's youth, farmers, fishermen and MSME sector. Starmer said the agreement is the 'biggest and most economically significant trade deal' concluded by the UK since leaving the European Union (EU) in 2020 and also 'one of the most comprehensive deals' by India.
Speaking at a media interaction with Starmer, Modi said: 'On the one hand, Indian textiles, footwear, gems and jewellery, seafood and engineering goods will get better market access in the UK. New opportunities will be created in the UK market for India's agricultural produce and processed food industry.'
He added, 'On the other hand, products made in the UK, such as medical devices and aerospace parts, will be available to the people and industry of India at accessible and affordable rates.'
The DCC, Modi said, will give new energy to the services sectors of both sides by boosting the ease of doing business. 'Along with this, the UK economy will get Indian skilled talent,' he said. He added that the deal between two democratic countries and major economies will strengthen global stability and prosperity.
Starmer said that, apart from benefiting whisky distillers in Scotland and the services sector in London, Manchester, and Leeds, the deal will lower prices on Indian goods, including clothes, shoes, and food.
'It will add about £4.8 billion to the UK economy every year and £2.2 billion to wages and hundreds of millions of pounds to regions and nations up and down the UK,' he added.
The India-UK Vision 2035, aimed at renewing the bilateral comprehensive strategic partnership, will serve as a roadmap for a reliable partnership in technology, defence, climate, education, and people-to-people connect, Modi said. The two sides will also work to strengthen their Technology Security Initiative, launched a year ago to drive cooperation in telecom, critical minerals, IA, semiconductors, quantum computing and biotech.
The trade deal provides near-complete tariff elimination for 99% of Indian exports, unlocking opportunities for labour-intensive sectors, processed food items and other high-tariff segments where India has a competitive edge.
For instance, duties on 99.7% of tariff lines for processed food items will fall from as high as 70% to zero, and for animal products, from the range of 20% to zero for 99.3% of tariff lines. Other sectors where duties will be cut to zero are marine products (20%), transport and automobiles (18%) leather and footwear (16%), electrical machinery (14%), and aluminium (10%).
The elimination of tariffs on textiles and clothing, from the current level of 12%, will enhance India's competitiveness against players such as Bangladesh and Vietnam and boost exports of value-added garments. Exporters of seafood, dairy and meat products are expected to benefit from the cut in levies on animal and marine products.
In addition to cutting tariffs, the deal will streamline trade protocols and ensure protection for India's agricultural sector, which is the cornerstone of rural livelihoods and economic security, officials said. The benefits for Indian farmers in UK markets will match or exceed those enjoyed by exporters from Germany, the Netherlands and other EU members, and agricultural exports are forecast to rise by 20% in the next three years, they said.
The FTA excludes India's most sensitive agricultural segments, with no tariff concessions on dairy products, apples, oats and edible oils. These exclusions, the officials said, reflect India's calibrated trade strategy that prioritises food security, domestic price stability and protection of vulnerable farmers.
The deal's sanitary and phytosanitary (SPS) measures will help Indian exporters meet British standards and reduce rejections, the officials said.
In the services sector, Indian service providers are expected to benefit from opportunities in the UK, especially in management consultancy, computer-related services and education services. The deal also eases mobility for Indian professionals, including contractual service suppliers working on projects in the UK, yoga instructors and chefs.
The inclusion of a first-of-its-kind trade and gender chapter in the trade deal aims to empower Indian women and ensure gender inclusion, with targeted support for women-led enterprises and workers.
India-UK trade in goods and services was worth $57.8 billion (£42.6 billion) in January-December 2024, representing an 8.3% increase from 2023. India's imports from the UK totalled £17.1 billion, while its exports to the UK were worth £25.5 billion.
Total bilateral trade in goods was worth £17.8 billion in 2024, while total bilateral trade in services amounted to £24.8 billion. India was Britain's 11th largest trading partner in this period, accounting for 2.4% of the UK's total trade.
India's key exports to Britain include textiles, apparel and clothing accessories, pharmaceutical products, telecom and sound equipment, refined oil, electrical and electronic equipment, machinery appliances, iron and steel, and gems and jewellery. India's main imports from the UK are non-ferrous metals, metal ores and scrap, industrial machinery, transport equipment, beverages and tobacco, electrical machinery and appliances, professional and scientific instruments, and chemicals.
Sunil Bharti Mittal, chairman of Bharti Enterprises and co-chair of the India-UK CEO Forum, who is heading a delegation of 16 Indian business leaders accompanying the Prime Minister, said Indian industry welcomed the trade deal with 'great optimism'. The business delegation was organised by the Confederation of Indian Industry (CII).
'This agreement establishes a modern, forward-looking partnership that will stimulate innovation, ease market access and foster investment. Businesses in India as well as the UK stand to gain tremendously, as it lays the groundwork for scaling up bilateral cooperation across key growth sectors,' Mittal said.
The Federation of Indian Chambers of Commerce and Industry (FICCI) also welcomed the trade deal, with its president, Harsha Vardhan Agarwal, stating that it marked a key milestone in India's evolving trade architecture. 'It complements the objectives of Atmanirbhar Bharat by empowering domestic industries to scale globally, engage competitively, and leverage value chains more effectively,' he said.
Tufan Erginbilgic, the CEO of Rolls-Royce Plc, hailed the free trade agreement as a landmark in bilateral cooperation. 'We welcome the new UK-India roadmap for closer collaboration on defence, technology and innovation. Rolls-Royce is growing its aerospace capabilities in India, and we look forward to working with Indian partners to co-develop power and propulsion technologies for India and the world,' he said.