Key Highlights of the Agreement
- Zero Duties on Indian Exports:
- 99% of Indian exports to the UK will now face zero tariffs.
- Covers almost 100% of India’s current export value to the UK.
- Tariff Reduction by India:
- India will cut duties on 90% of tariff lines for UK goods.
- 85% of these will become zero-tariff within 10 years.
- Double Contribution Convention:
- Indian workers in the UK and their employers will be exempt from UK social security payments for 3 years.
- A major relief for Indian professionals on temporary assignments.
Relevance : GS 2(International Relations),GS 3(Indian Economy)
Sectoral Gains
For India:
- Textiles, Leather, Jewelry, Engineering goods to get expanded access.
- Enhanced competitiveness in UK markets due to zero-duty advantage.
- Increased employment in export-focused MSMEs.
For the UK:
- Alcoholic Beverages:
- Tariff on whisky and gin to drop from 150% to 75% immediately, then to 40% by year 10.
- Automobiles:
- Tariffs to reduce from 100%+ to 10% under a quota-based system.
- Other Goods:
- Reduced tariffs on cosmetics, lamb, salmon, aerospace parts, medical devices, chocolates, soft drinks, biscuits.
Strategic and Diplomatic Significance
- First Major FTA for UK post-Brexit with a large economy.
- Strengthens India–UK strategic partnership across trade, people-to-people ties, and mobility.
- Facilitates UK’s Indo-Pacific tilt and enhances India’s standing as a reliable trade partner.
- Boosts India’s image ahead of elections and in G20 diplomacy context.
Economic Implications
For India:
- Expected to boost exports, especially in labour-intensive sectors.
- FDI attraction likely to rise in export-oriented manufacturing.
- May add over $10 billion to bilateral trade in the medium term.
Challenges:
- Indian industries may face competition from UK goods, especially in premium consumer sectors.
- Automobile sector concerns over cheap UK imports despite quotas.
Political & Policy Impact
- Seen as a win for Government’s foreign trade agenda.
- Labour government in the UK under Keir Starmer showcases continuity from Conservative-initiated talks.
- UK businesses gain a large emerging market access amid EU market complexities.
