Britain and India signed a free trade agreement yesterday during a visit by Indian Prime Minister Narendra Modi, sealing a deal to cut tariffs on goods from textiles to cars and allow more market access for businesses.
The two countries concluded talks on the trade pact in May after three years of stop-start negotiations, with both sides hastening efforts to clinch a deal in the shadow of tariff turmoil unleashed by US President Donald Trump.
The agreement between the world’s fifth and sixth largest economies aims to increase bilateral trade by a further £25.5 billion ($34bn) by 2040.
It is Britain’s biggest trade deal since it left the European Union in 2020, although its impact will be a fraction of the effect of leaving the orbit of its closest trading partner.
It will take effect after a ratification process, likely within a year.
British Prime Minister Keir Starmer said the deal would bring “huge benefits” for both countries, making trade cheaper, quicker and easier.
Under the trade agreement, India will cut duties on cars to 10 per cent within five years from current levels of up to 110pc under a quota system that will be gradually liberalised.
In return, Indian manufacturers will gain access to the UK market for electric and hybrid vehicles, also under a quota system.
The ministry has said 99pc of Indian exports to Britain would benefit from zero duties under the deal, including textiles, while Britain will see reductions on 90pc of its tariff lines, with the average tariff UK firms face dropping to 3pc from 15pc.
While it is Britain’s biggest deal since Brexit, the projected boost to British economic output, of £4.8bn a year by 2040, is small compared to the country’s gross domestic product of £2.6 trillion in 2024.
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