6 min readMay 7, 2025 11:41 AM IST
First published on: May 7, 2025 at 11:41 AM IST
The news that Britain and India have agreed to a landmark free trade deal comes as a monumental development in a turbulent year for global trade. After three years of discussions and a reset since February, negotiators on both sides worked around the clock to secure alignment. It has resulted in the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU, and the most far-reaching deal India has ever agreed to. Both Sir Keir Starmer and Narendra Modi deserve appreciation for converting well-meaning gestures into outcomes. Governments across the globe should draw inspiration from this milestone and redouble their efforts to reduce barriers to free trade and promote consumer choice.
In a year where political brinkmanship has dominated headlines, it is refreshing to witness traditional diplomacy and statesmanship coming together to usher change. The Prime Ministers of the UK and India led the way, but we should also acknowledge Jonathan Reynolds, Piyush Goyal, and their respective officials. From a British perspective, the deal is expected to increase bilateral trade by £25.5 billion, UK GDP by £4.8 billion and domestic wages by £2.2 billion each year in the long run. India stands to gain a potential material boost in its manufacturing and service sectors.
The deal will slash Indian tariffs on key products such as whisky, cosmetics and medical devices, locking in reductions on 90 per cent of tariff lines for UK exports, with 85 per cent of these becoming fully tariff-free within a decade. Whisky and gin tariffs will be halved from 150 per cent to 75 per cent before reducing to 40 per cent by year 10 of the deal, while automotive tariffs will go from over 100 per cent to 10 per cent under a quota. Other goods with reduced tariffs, which can make trade cheaper for businesses and Indian consumers, include cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate and biscuits. UK firms would also gain access to India’s vast procurement market covering goods, services and construction.
From an Indian exports-oriented perspective, Britain agreed to virtually eliminate tariffs on clothes, footwear and food products. Practically speaking, nearly all Indian exports to Britain will therefore likely face no duties. In a significant move, both countries agreed to a “double contribution” convention for temporary mobility arrangements up to three years, under which social security contributions will be paid by employers and employees in their home country only, rather than in both places. Thus, an Indian firm sending an employee to the UK on a temporary assignment would pay a contribution in India rather than the UK. This should help labour mobility across both markets — a key point for India.
What are the broader implications of this deal, though? From a political lens, the deal could not have come at a better time for Sir Keir. Buffeted by a sluggish economy with lagging productivity and scarcely any “Brexit dividend” in sight, he badly needed to offer voters some hope. The deal gives him some credible wiggle room to signal that he is capable of protecting British interests in uncertain times. To be fair, Boris Johnson and Rishi Sunak had pushed hard as well, but it is Sir Keir who got this over the line. What he’d also be wishing for is that this deal galvanises negotiations with other jurisdictions, especially the United States. From a British perspective, the deal seeks to underline that the UK is “open for business”.
PM Modi should also be pleased. This deal showcases his ability to champion Indian interests and obtain reasonable concessions from his counterpart. It should serve to promote his “Make in India” vision. As India shows that it is prepared to lower regulatory and economic barriers to free trade, those who seek to diversify their global supply chains may take a renewed look at what it has to offer. Make no mistake about it, Modi has been bold. Despite the narrative of India embracing globalisation, the inconvenient truth is that the country has also had a well-entrenched protectionist lobby. It has taken a politician of Modi’s resolve to buck the trend. This should therefore also be seen as Modi’s attempt to respond to geopolitical shifts by thinking practically and for the longer term.
In truth, although the deal may have been bilateral in nature, a third party loomed over it: US President Donald Trump. If it wasn’t for his clarion call on US tariff imposition, the UK and India may have continued their dialogue with no end in sight. There is nothing quite like the ticking clock of Trumpian reciprocal tariffs looming to focus the mind on a conclusion rather than endless rhetorical navel-gazing. Whisper it softly: Trump’s methods may be controversial, but he does have an underlying point. Far too many countries have had high barriers to free trade.
Paradoxically, therefore, a protectionist pivot from Washington became the catalyst for a free trade deal between Britain and India. At a time of instability, the deal offers economic hope and highlights the virtue of problem-solving through mutual respect and collaboration. Britain and India have provided a template to inspire others. In these tumultuous times, if we were to see an acceleration of trade deals elsewhere promoting open markets, reducing costs and increasing consumer choice, it would represent a global silver lining after all.
The writer is a London-based lawyer and political commentator
At a time of instability, the deal offers economic hope and highlights the virtue of problem-solving through mutual respect and collaboration. Britain and India have provided a template to inspire others (Credit: x/@narendramodi)
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