Britain and India have finalized a historic free trade agreement that will drastically reduce tariffs on key goods, including British whisky and cars exported to India, while making Indian textiles and food cheaper for UK consumers. The deal, signed on May 6, 2025, is projected to boost bilateral trade by £25.5 billion ($34 billion) annually by 2040, marking the most significant UK trade pact since Brexit.
Key Features of the Agreement
- Tariff Cuts on British Exports: India will halve its steep tariffs on Scotch whisky and gin (from 150% to 75% initially, dropping to 40% over a decade), and sharply reduce duties on British cars, medical devices, advanced machinery, lamb, and other products.
- Cheaper Indian Goods in the UK: The UK will lower tariffs on Indian textiles, apparel, footwear, jewelry, seafood, and food products, making these items more affordable for British consumers.
- Market Access and Services: British companies will gain greater access to India’s services sector, while Indian professionals will have expanded opportunities to work in the UK, though the points-based immigration system remains unchanged.
- Automotive Quotas: The deal introduces quotas for auto imports, with Indian automotive tariffs dropping from over 100% to 10% for a specified number of vehicles.
- Social Security Waiver: Indian workers temporarily posted to the UK will benefit from a three-year waiver on social security contributions, reducing costs for both employees and employers.
Economic Impact
- The agreement is expected to add £4.8 billion ($6.4 billion) annually to the UK economy and create new export opportunities for Indian sectors such as textiles, engineering, and IT services.
- The deal comes as both countries seek to counter the effects of recent global tariff hikes and reinforce their economic partnership in a shifting trade landscape.
Leaders’ Reactions
Indian Prime Minister Narendra Modi hailed the deal as “ambitious and mutually beneficial,” emphasizing its potential to drive investment, job creation, and innovation in both countries. UK Prime Minister Keir Starmer called it a “new era for trade,” highlighting the removal of barriers and the strengthening of bilateral ties.
The agreement will be implemented after legal formalities and parliamentary approvals in both countries, with most tariff reductions phased in over the next decade. Consumers and businesses are expected to see gradual benefits as the new rules take effect.
This landmark pact marks a major step forward in UK-India relations, promising lower prices, expanded trade, and deeper economic cooperation between two of the world’s largest economies.