After years of arduous negotiations, the two economic powers have finally found common ground. Keir Starmer and Narendra Modi yesterday put their signatures on a trade agreement that promises to reshape the economic relations between the United Kingdom (UK) and India, and experts are already calling it a “watershed moment” in the post-Brexit era.
The UK Prime Minister and the Indian Prime Minister signed a hard-won trade agreement that will drastically reduce tariffs on products including Scotch whisky and English gin exported to India, as well as Indian food and spices sent to the UK.
The numbers speak for themselves: the UK government states that the agreement “will increase bilateral trade by 25.5 billion pounds(34 billion dollars), the UK GDP by 4.8 billion pounds (6.4 billiondollars), and wages by 2.2 billion pounds (2.9 billion dollars) annually on a long-term basis.”
The most significant changes concern tariff policy: India has some of the highest import tariffs in the world. Under the agreement, it will reduce tariffs on 90% of UK products sold in the country. Within a decade, 85% of UK products will become tariff-free in India.
A particularly dramatic reduction will occur with alcoholic beverages – tariffs on spirits such as whisky and gin will fall from the current 150 percent to 75 percent, with a plan for further reductions over the duration of the agreement. Also, automobile tariffs will be reduced to around 10 percent instead of the current rate of over 100 percent.
UK Prime Minister Keir Starmer said that the “historic” free trade agreement to be signed with India is a “major victory” for the UKeconomy. Starmer added that the agreement will open thousands of new jobs for UK citizens.
The Indian Ministry of Commerce stated that 99 percent of the country’s exports will be exempt from tariffs under the agreement, which includes clothing, footwear, and food. This figure shows how significant concessions the UK made to attract Indian products to its market.
The path to this agreement was long and demanding. India and the UK reached a landmark trade agreement that reduces tariffs on cosmetics, vehicles, alcoholic beverages, and other goods, as both sides seek wins to offset disruptions caused by President Donald Trump’s protectionist policies. Official talks began in 2022, and the two countries held 13 rounds of unsuccessful negotiations that were suspended ahead of elections on both sides in 2024.
Keir Starmer and India’s Narendra Modi also agreed in advance to strengthen joint efforts in combating illegal migration and organized crime. Modi will also meet with King Charles III during his short visit to the UK.
This agreement comes at a time when the world is entering an era of trade wars and economic protectionism. Will the UK-Indian trade alliance become a model for future economic partnerships, or will it prove to be a short-lived experiment?
The answer may determine the direction of global trade in the coming decades.
