The UK became one of the first world leaders to sign an historic free trade deal agreement with India, the world’s fastest-growing major economy, on 6 May.
This landmark deal will boost bilateral trade by £25.5 billion and could add £4.8 billion annually to the UK economy by 2040.
The British government said the deal was the “biggest and most economically significant” trade agreement the UK had signed since leaving the European Union in 2020.
UK Business Secretary Jonathan Reynolds said the benefits for UK businesses and consumers were “massive”. Meanwhile, Indian Prime Minister Narendra Modi said the deal would help “catalyse trade, investment, growth, job creation, and innovation in both our economies”
The agreement includes a range of tariff cuts on British imports to India and also exempts some short-term workers from India from paying into Britain’s social security system for three years.
AJ Bell head of financial analysis Danni Hewson said: “India’s economy has gained prominence over the past few years, and it presents a huge opportunity for UK businesses to increase their exports to a receptive market – something which should help offset any negative impacts from US trade policy, whatever that finally ends up looking like.”
Lord Mayor of London, Alastair King said: Now is not the time to be shy about our strengths. Now is the time to build on the momentum of the UK-India trade deal to jump on planes…and bang on doors…and present the UK’s offer to partners old and new.
“If we do that, we will secure new business, investment and growth for the UK. And will be saying to the world that free trade is here to stay.”
Britain is expected to reap a lot of benefits from the trade deal, various economists, analysts and policymakers working on blueprints on the partnership across both countries have said.
Here’s how the UK-India trade deal is expected to help Britain
GDP boost
The agreement is expected to significantly accelerate trade between the UK and India – increasing bilateral trade by £25.5 billion, £15.7 billion of which is expected to be from rising exports from UK businesses into India.
The government estimates that the UK GDP is expected to increase by £4.8 billion (0.1%) each and every year in the long term. Workers will benefit from wages growing by a further estimated £2.2 billion each and every year in the long term.
Access to Indian markets
The deal will give UK businesses unique and unprecedented access to India’s public procurement market, comprising approximately 40,000 tenders with a value of at least £38 billion a year.
Slashing taxes
The BBC reports that the UK has lowered taxes on goods imported from India including:
clothing and footwear, food products including frozen prawns, jewellery and gems and some cars.
Meanwhile, India has cut taxes on goods imported from the UK including cosmetics, scotch whisky, gin and soft drinks, higher-value cars, food including lamb, salmon, chocolate and biscuits, medical devices, aerospace and electrical machinery
Net Zero ambitions
UK businesses are set to receive new access to government procurements in the green infrastructure and energy sectors – using their expertise to support India’s own transition. In return, the UK government has committed to promote action on issues including tackling air pollution, defending the marine environment, reducing deforestation, protecting biodiversity, and reducing waste.
Boost to the finance sector
UK ownership or investment into Indian insurance or banking firms will be locked in at up to 74% UK owned or invested.
The government said: “This chapter will take important steps to support innovation in financial services in the UK and India. We have jointly recognised the importance of developing an efficient, safe and secure environment for cross-border electronic payments. The deal will commit the UK and India to cooperate on issues such as FinTech and diversity in finance, alongside promoting financial stability, and improving market integration.”
Small and medium-sized firms
This deal will also include setting up contact points and facilitating the exchange of best practices that make it easier for SMEs to enter the market.
“The UK and India will also make trade information accessible online and easier to understand, so that SMEs can clearly understand and navigate the other country’s systems and processes. We may also explore how we can further reduce trade barriers for SMEs and share best practice on important issues that may prevent SMEs from exporting, such as access to finance,” the government said.
Telecoms
UK telecoms suppliers will have guaranteed access to the facilities and services in India on a transparent and non-discriminatory basis, the government announced. It further added that the chapter will ensure access to telecommunications networks and services for UK suppliers in India and guarantees that critical scarce resources are administered in an open and objective manner. These critical resources include spectrum and radio frequencies that are essential for any wireless communication, such as allowing a phone to make calls or connect to the internet.
