UK–India Free Trade Agreement opens door to a £25.5bn trade boost, slashes tariffs on whisky, cars, textiles - Trade Treasury Payments

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UK–India Free Trade Agreement opens door to a £25.5bn trade boost, slashes tariffs on whisky, cars, textiles

The United Kingdom and India have concluded a long-anticipated free trade agreement after more than three years of negotiations, marking Britain’s most significant post-Brexit trade pact to date — and the most ambitious India has ever signed.

The agreement will cut tariffs on a wide range of goods and unlock new market access opportunities across whisky, gin, cars, textiles, processed food, and footwear. The UK government projects it will increase bilateral trade by £25.5bn by 2040, with a £4.8bn annual uplift to UK GDP in the long term.

As of the end of 2024, total trade in goods and services between the UK and India reached £42.6 billion, an 8.3% increase from the previous year. This comprised £17.1 billion in UK exports to India and £25.5 billion in imports from India, resulting in a trade deficit of £8.4 billion for the UK. Notably, services accounted for 58.9% of UK exports to India, while goods made up 41.1% .

Prime Minister Narendra Modi hailed the agreement as a “historic milestone”, and wrote on social media platform X, “Delighted to speak with my friend PM @Keir_Starmer. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention. These landmark agreements will further deepen our Comprehensive Strategic Partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies. I look forward to welcoming PM Starmer to India soon.”

In a call earlier today, Modi thanked Prime Minister Starmer for his “decisive leadership in getting the deal over the line.” The two leaders described the FTA as a landmark step underpinned by pragmatism and purpose. For the UK, it is the largest free trade deal struck since leaving the European Union. For India, it represents a new high watermark in trade diplomacy.

Key provisions include the halving of India’s 150% tariff on Scotch whisky and gin, which will fall to 75% immediately and decline further to 40% over the next decade. Automotive tariffs — previously exceeding 100% — will be reduced to 10% under a quota-based system.

In return, the UK will cut tariffs on Indian exports such as textiles, footwear, seafood, and processed food, which the government says will provide “cheaper prices and more choice” for British consumers. Based on 2022 trade, the UK estimates Indian tariff cuts worth over £400 million per year initially, rising to £900 million annually within ten years.

Prime Minister Starmer called the agreement part of his government’s “Plan for Change,” and said, “Today we have agreed a landmark deal with India – one of the fastest growing economies in the world – which will grow the economy and deliver for British people and business.

“Strengthening our alliances and reducing trade barriers with economies around the world is part of our plan to deliver a stronger and more secure economy here at home.”

Business Secretary Jonathan Reynolds, who led the final round of negotiations with Indian Commerce Minister Piyush Goyal, said, “By striking a new trade deal with the fastest-growing economy in the world, we are delivering billions for the UK economy and wages every year and unlocking growth in every corner of the country, from advanced manufacturing in the North East to whisky distilleries in Scotland.”

As part of the diplomatic follow-up, Modi formally invited Starmer to visit India, which the Prime Minister accepted, stating he looked forward to visiting “at the earliest opportunity.”

Speaking to TTP, Imran Khan, Executive Director, ICC India, said, “The India-UK Free Trade Agreement builds upon a robust bilateral trade relationship, currently valued at approximately USD 60 billion, with ambitions to double this figure by 2030. This partnership underscores a mutual commitment to fostering economic growth through enhanced market access and innovation.”

While critics argue the deal’s economic benefits are modest compared to lost EU trade, the UK–India FTA is a cornerstone of the UK’s post-Brexit trade strategy — a practical example of recalibrating towards high-growth markets.

It also sets a precedent for India’s future deals with other major economies, including ongoing negotiations with the EU and discussions with the United States.