India and the United Kingdom have officially signed a long-anticipated Free Trade Agreement (FTA), ending nearly three years of negotiations. This deal, between the world’s fifth and sixth-largest economies, arrives at a crucial time — global trade is facing uncertainty due to shifting tariff regimes, particularly from the United States.
But what exactly is an FTA? Simply put, it’s a pact between nations that reduces or eliminates trade barriers like tariffs and quotas. The aim: boost trade, investment, and innovation between partner countries.
According to British officials, the UK-India FTA could add £25.5 billion to bilateral trade annually by 2040. In 2024 alone, trade between the two countries stood at £42.6 billion. Britain sees this deal as its biggest trade breakthrough since Brexit.
So, what’s in the deal? For starters, India will gradually slash tariffs on British whisky and gin — from 150% to 40% over 10 years — giving a major boost to the UK’s spirits industry. Auto tariffs will also be reduced to 10% under a quota system, while cosmetics, aerospace components, medical devices, lamb, salmon, and chocolate will see relaxed duties.
India, in turn, gains modest increases in work visas for its professionals in sectors like IT and healthcare — though far fewer than originally proposed. Just 100 new visas a year are expected.
The deal was driven by strategic shifts. India’s refusal to join the China-led RCEP and the UK’s exit from the EU created a need for fresh trade partners. Additionally, both nations sought to de-risk from dependence on China and mitigate economic challenges like inflation and supply chain disruptions.
However, not everyone’s celebrating. A Global Trade Research Initiative report noted that most Indian exports already enjoy low UK tariffs — so benefits may be limited. India also pushed back on UK’s proposed carbon tax on imports, which could’ve hurt Indian manufacturers.
Still, the FTA sends a strong signal: in a world of trade wars and protectionism, India and the UK are betting on openness.
