Just this week, it was announced that the UK and India have come to a free trade agreement that promises to lower tariffs and increase trade between the two countries.
India is now the most populated country in the world, and is believed to be on the way to becoming one of the globe’s biggest economies. And with a population of 1.45 billion, it definitely has a lot of potential customers to tap into.
According to The BBC, this deal is expected to boost trade by an extra £25.5bn a year by 2040. So, what is it?
What Is The UK-India Trade Deal?
In short, the deal makes it easier for the UK and India to trade by reducing tariffs on a range of items.
Here’s what has been agreed:
India will lower tariffs on 90% of UK products, including whisky (from 150% to 40% over 10 years), cars (from over 100% to 10%), medical devices, aerospace parts, machinery, lamb, salmon, chocolate, soft drinks, cosmetics and biscuits.
India has said 85% of these items will become tariff-free within 10 years.
In exchange for this, the UK will remove or lower tariffs on 99% of Indian exports, including jewellery, footwear, gems, leather, toys, engineering goods and car parts.
Another huge win for the UK is that British companies will be able to bid for public sector contracts in India – which could be a huge boost to their customer base.
The deal also includes plans to make customs processes easier, allowing imported goods to flow into these countries faster and more efficiently.
New National Insurance Laws
But perhaps apart from the tariffs, one of the biggest changes being agreed is that Indian workers (and their employers) will no longer have to pay National Insurance for three years. This makes it much easier for Indian professionals to transfer to the UK and might even provide an incentive for UK companies to employ young and talented Indian workers.
This has definitely emerged as one of the more controversial policies.
Firstly, the government recently introduced a rise in employer National Insurance contributions from 13.8% to 15%. According to CIPD, one in four (25%) of UK employers planned to make redundancies in the three months to March 2025 to avoid this inflated cost.
Now, with these latest rules in place, companies may see huge tax benefits to employing Indian workers over British ones.
In response to this Business Secretary Jonathan Reynolds told the BBC that this is just another example of a double taxation agreement – something that already exists with over 50 countries.
The government maintains that this policy will not undercut UK workers, but just means that companies won’t be taxed twice on their employers.
So, Why Now?
You might be reading this and thinking – why now? Well, negotiations for this deal actually begun years ago, but with Donald Trump recently imposing tariffs on imports to the US, it’s no surprise that the UK and India rushed to close the deal.
But more importantly – the deal still has a way to go.
First, it must be signed by UK prime minister Keir Starmer and Indian prime minister Narendra Modi, and then passed by both parliaments. Only then will it come into full effect.
UK Trade Deals: What Do We Currently Have?
As part of Brexit, the UK has had to start negotiating its own trade deals and has already done so with countries like Australia and New Zealand as well as the EU.
According to the Gov.uk website, the current trade agreements that have been agreed include:
- The UK-Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
- UK-Australia Free Trade Agreement
- UK-New Zealand Free Trade Agreement
- Singapore Digital Economy Agreement
- Japan Comprehensive Economic Partnership Agreement
- Norway, Iceland and Liechtenstein Free Trade Agreement
- UK-Ukraine Digital Trade Agreement
In addition to this, the UK-EU Trade and Cooperation Agreement treaty covers all UK trade with the EU.
When it comes to upcoming negotiations, the UK is currently in talks with the following countries to solidify favourable trade agreements:
- Republic of Korea
- Switzerland
- Canada
- Mexico
- Gulf Cooperation Council (GCC)
- Israel
The Future Of UK Trade
In a world where tariffs can have a big impact on cross-country trade, this new deal is a sign of strengthening relationships between the UK and India.
Hopefully, it signals the beginning of a long-standing and economically beneficial agreement between these two global superpowers.
