India and the United Kingdom on Tuesday confirmed the completion of a “landmark” multi-billion-pound Free Trade Agreement (FTA), capping off years of negotiations that began in 2022. The deal is poised to unlock massive economic opportunities for both countries, with a significant reduction in tariffs, improved market access, and a boost to bilateral trade.
The agreement covers reductions on 90 per cent of tariff lines and is expected to contribute an additional 4.8 billion pounds annually to the British economy by 2040.
A ‘Very Warm’ Call Seals the DealThe agreement was finalised following a “very warm” phone call between Indian Prime Minister Narendra Modi and his British counterpart Keir Starmer. The FTA will now move through the legal text finalisation process before being presented to the British Parliament for approval.
“Delighted to speak with my friend PM @Keir_Starmer. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention,” Modi posted on social media platform X following the landmark deal.
“These landmark agreements will further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies. I look forward to welcoming PM Starmer to India soon,” he added.
Meanwhile, in a post on X, the UK PM said, “The UK and India have agreed a landmark free trade deal to make working people and businesses better off in both our countries. Delivering on our Plan for Change to grow the economy, raise living standards, and put money back in people’s pockets.”
Three Years in the Making
The finalisation of the FTA marks the culmination of negotiations that began under the leadership of then-UK Prime Minister Boris Johnson and Indian Prime Minister Narendra Modi, who had originally set a target to conclude the deal by October 2022. However, discussions were derailed by a range of complex issues, such as tariff disagreements on key sectors like automobiles and alcoholic beverages, alongside recurring political instability in the UK.
The negotiations gained renewed momentum recently, with two visits last week to the UK by Indian Commerce Minister Piyush Goyal, who held crucial meetings with British Trade Secretary Jonathan Reynolds. These efforts proved pivotal in pushing the deal across the finish line.
Key Wins for India: Mobility, Social Security, and Market AccessIndia has secured some of its long-standing demands as part of the deal:
Among the key British wins are deep tariff cuts in critical sectors:
According to the UK Department for Business and Trade (DBT), based on 2022 trade statistics, India’s tariff cuts will be worth over 400 million pounds when the deal takes effect—more than doubling to 900 million pounds after a decade.
"By striking a new trade deal with the fastest-growing economy in the world, we are delivering billions for the UK economy and wages every year and unlocking growth in every corner of the country, from advanced manufacturing in the North-East to whisky distilleries in Scotland,” said Reynolds.
“In times of global uncertainty, a pragmatic approach to global trade that provides businesses and consumers with stability is more important than ever,” he said.
The FTA is expected to significantly enhance the already robust trade relationship between India and the UK. Current bilateral trade stands at 41 billion pounds a year, and the new agreement is projected to increase this by an additional 25.5 billion pounds.
UK officials also estimate that the FTA will result in 2.2 billion pounds in additional annual wages for British workers in the long run.
"FTAs are notoriously complex, and this truly is a remarkable achievement that will serve both countries well. This agreement represents a significant milestone in UK-India relations, underscoring the potential of our partnership and the opportunities that lie ahead,” Manoj Ladwa, Founder and Chairman of UK-based policy platform India Global Forum (IGF), was quoted as saying in a PTI report.
An accompanying Bilateral Investment Treaty (BIT), which was being negotiated alongside the FTA, has not yet been finalised. However, British officials have expressed optimism about concluding the agreement soon.
The FTA talks, which initially began in 2022, faced delays due to general elections in both countries. Negotiations resumed in February this year, leading to the breakthrough now being celebrated as a strategic milestone in UK-India relations.
With legal ratification now pending, both sides are looking ahead to a new era of economic cooperation driven by mutual growth and opportunity.
