UK, India Agree Trade Deal Amid Fallout of Trump Tariff Wars

New Delhi: Prime Minister Narendra Modi spoke to British PM Keir Starmer on Tuesday evening before announcing the “successful conclusion of an ambitious and mutually beneficial India–UK free trade agreement (FTA) along with the double contribution convention”, which the two leaders described as a “historic milestone in the bilateral comprehensive strategic partnership that will foster trade, investment, innovation and job creation in both the economies”.

Announcing the deal, Mr Modi posted on X, “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. 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.”

In his reaction, Mr Starmer said, “We are now in a new era for trade and the economy. That means going further and faster to strengthen the UK’s economy, putting more money in working people’s pockets. Through this government’s stable and pragmatic leadership, the UK has become an attractive place to do business. Today we have agreed to a landmark deal with India -- one of the fastest-growing economies in the world, which will grow the economy and deliver for British people and business…”

During the call with the Prime Minister, the British PM mentioned the "terrorist attack in Jammu and Kashmir last month and reiterated his deep condolences at the tragic and senseless loss of life", the British High Commission said in a statement on the call. It added: "Mr Modi extended an invitation to India, which Mr Starmer was pleased to accept and said he looked forward to visiting India at the earliest opportunity."

India said the FTA “ensures comprehensive market access for goods across all sectors, covering all of India’s export interests” and that it will “gain from tariff elimination on about 99 per cent of the tariff lines covering almost 100 per cent of the trade value, offering huge opportunities for an increase in the bilateral trade between India and the UK”.

Terming the FTA with Britain a “modern, comprehensive and landmark agreement which seeks to achieve deep economic integration along with trade liberalisation and tariff concessions”, India added that the FTA “opens up massive export opportunities for labour-intensive sectors such as textiles, marine products, leather, footwear, sports goods and toys, gems and jewellery and other important sectors such as engineering goods, auto parts and engines and organic chemicals”.

It also mentioned a “significant boost to trade in services, such as IT/ITES, financial services, professional services, other business services and educational services, besides stronger strategic alignment and greater global mobility for aspirational young Indians” and spoke of a “huge win with a three-year exemption from social security payments for Indian employees working in the UK”.

On the double contribution convention, the Union commerce ministry on Tuesday said, “The exemption for Indian workers who are temporarily in the UK and their employers from paying social security contributions in the UK for a period of three years under the double contribution convention will lead to significant financial gains for the Indian service providers and enhance their competitiveness in the UK market that will create new job opportunities as well as benefit a large number of Indians working in the UK.”

In a statement, the PMO said that Mr Modi and Mr Starmer agreed that landmark agreements between the two big and open market economies of the world will open new opportunities for businesses, strengthen economic linkages and deepen people-to-people ties.

The PMO added, "The conclusion of a balanced, equitable and ambitious FTA will unlock new potential for the two nations to jointly develop products and services for global markets. This agreement cements the strong foundations of the India-UK comprehensive strategic partnership and paves the way for a new era of collaboration and prosperity.”

On its part, Britain said the FTA will “slash Indian tariffs on key products such as whisky, cosmetics and medical devices, locking in reductions on 90 per cent of tariff lines for UK exports to unleash opportunities for businesses across regions and nations of the UK, with 85 per cent of these becoming fully tariff-free within a decade”.

The British government said: “Whisky and gin tariffs will be halved from 150 per cent to 75 per cent before reducing to 40 per cent by year 10 of the deal, while automotive tariffs will go from over 100 per cent to 10 per cent under a quota.”

The British government statement said that “other goods with reduced tariffs … include cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate and biscuits” and termed the pact as a “multi-billion-pound boost to the UK’s economy”.

Britain said its “business and trade secretary Jonathan Reynolds and commerce minister Piyush Goyal held final talks in London last week after relaunching negotiations only two months ago”. It added: “Negotiators on both sides have worked around the clock since February to get this deal done, which is the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU and the best deal India has ever agreed to.”

India and Britain began FTA negotiations over three years ago in January 2022, but hard bargaining by both sides delayed any outcome. Britain announced in February this year under its Labour government led by Mr Starmer that talks for the FTA were “relaunched” with India. The FTA deal with Britain comes amid India's ongoing FTA negotiations with the European Union (EU) and a bilateral trade pact with the United States.