India and UK signed mutually beneficial FTA

India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement (FTA), along with a Double Contribution Convention. These landmark agreements will further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation in both the economies.

The deal has been concluded after three years of stop-start negotiations and aims to increase bilateral trade by a further 25.5 billion pounds by 2040 with liberal market access and eased trade restrictions. The deal lowers tariffs on goods such as whisky, advanced manufacturing parts and food products such as lamb, salmon, chocolates and biscuits. It also agrees to quotas on both sides for autos imports.

The UK government said that India will now cut tariffs on 90 per cent of UK imports, with 85 per cent of those becoming tariff-free within the next decade. Further, it said that India would halve whisky and gin tariffs for UK imports to 75 per cent and cut auto tariffs to 10 per cent under a quota. Both countries are also seeking bilateral deals with the United States to remove some of Trump’s tariffs that have upended the global trade system, and the resulting turmoil sharpened focus in both London and New Delhi on the need to clinch a UK-India trade deal. The UK government said that its GDP would get a boost of 4.8 billion pounds a year by 2040 through the deal.

The negotiations are on three different fronts-FTA, Bilateral Investment Treaty and a social security pact called Double Contribution Convention Agreement. The pact marks India opening up its guarded markets, including automobiles. Talks over a free trade deal between India and Britain were initially launched in January 2022, and became a symbol of Britain’s hopes for its independent trade policy after leaving the European Union.

But negotiations were stop-start, with Britain having four different prime ministers since that launch date and elections in both countries last year. As many as 14 rounds of negotiations had taken place between India and the UK for the FTA. The bilateral trade between India and the UK rose to $21.34 billion in FY24 from $20.36 billion in FY23. The two seek to double their bilateral goods trade in the next 10 years from the current $20 billion. The social security pact, officially dubbed as Double Contribution Convention Agreement, would help avoid double contribution to social security funds by Indian professionals working for limited period in Britain. Indian professionals working for a limited period in Britain contribute to their social security funds but not able to get its benefit as they return once the projects are complete.