India and UK Reach Agreement on Historic Trade Deal with Tariff Reductions
India and the United Kingdom have reached a significant trade agreement after three years of extensive negotiations, a development both nations celebrate as a vital step towards bolstering their economies amidst the lasting impacts of U.S. tariff policies. The British government announced on Tuesday that the comprehensive deal is projected to generate an additional £25.5 billion ( billion) in bilateral trade, contribute £4.8 billion (.4 billion) to the UK’s GDP, and increase annual wages by £2.2 billion (.9 billion) in the long term.
Under this agreement, Indian tariffs are set to be substantially reduced, with reductions affecting 90 percent of tariff lines—85 percent of which will transition to being entirely tariff-free within a decade. This is anticipated to enhance trade flows not only for British sectors like alcohol and automotive production but also for a range of other goods including cosmetics, medical devices, aerospace components, and various food products.
The British whisky and gin industries particularly stand to benefit from tariff halving, decreasing from 75 percent to 40 percent over ten years. Simultaneously, automotive tariffs are poised to drop significantly, from over 100 percent to 10 percent under a quota system. These changes aim to create a more favorable trading environment for both nations.
India’s Trade Ministry has indicated that 99 percent of Indian exports will be exempt from import duties as a result of the deal, underscoring the agreement’s potential to elevate India’s standing in global trade. Trade Minister Piyush Goyal highlighted that this partnership is a step towards making India a global economic powerhouse, safeguarding core interests while facilitating greater integration into international value chains.
Additionally, a new “Double Contribution Convention” will exempt Indian workers in the UK from national insurance payments for up to three years, creating increased opportunities for skills exchange and workforce integration. Ongoing discussions are set to address a separate bilateral investment treaty, along with labor and environmental standards, reinforcing a commitment to sustainable economic growth.
The dialogue between Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer reflects the strategic significance of this agreement. Modi extended an invitation for Starmer to visit India, emphasizing that these landmark agreements deepen the Comprehensive Strategic Partnership between the two nations, fostering trade, investment, and job creation.
This agreement is heralded as the UK’s most substantial trade deal since formally exiting the European Union in 2020, positioning it as a turning point in expanding the UK’s global trade network. As many countries reassess their trade strategies in light of recent economic challenges, this agreement marks a notable advance for both India and the UK in navigating a new landscape of international commerce.
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