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India–UK FTA: Major tariff cuts announced in historic trade pact
Industry News- May 07,25
Automobile imports from the UK, which currently attract over 100% duty, will see tariffs reduced to 10% under a quota-based system.
Prime Minister Narendra Modi announced the finalisation of a historic Free Trade Agreement (FTA) between India and the United Kingdom, following a conversation with UK Prime Minister Keir Starmer. Described as a landmark in the two nations’ economic relations, the agreement includes sweeping tariff eliminations and is expected to significantly boost trade, investment, and manufacturing competitiveness.
A key highlight of the deal is the provision of zero-duty access for a wide range of Indian exports to the UK. This move is expected to enhance India’s manufacturing and export competitiveness, particularly in labour-intensive sectors such as textiles, leather, and processed foods. Simultaneously, India will reduce tariffs on 90% of UK imports, with 85% becoming tariff-free over the next decade, according to the UK government.
The FTA also includes a Double Contribution Convention—an important social security arrangement that exempts Indian workers in the UK from paying into both countries’ social security systems for a period of three years. This is aimed at reducing the financial burden on Indian professionals working in the UK.
Among the most significant tariff reductions are those benefiting the UK’s liquor and automobile sectors. Import duties on UK whisky and gin, currently at 150%, will be slashed to 75% immediately, and further reduced to 40% over ten years. Additionally, automobile imports from the UK, which currently attract over 100% duty, will see tariffs reduced to 10% under a quota-based system.
These changes are expected to provide UK-made products, particularly Scotch whiskies and premium automobiles, with a strong pricing advantage in the Indian market. However, this could intensify competition for Indian liquor companies, especially in the premium alcohol segment where many local brands have recently expanded globally.
Both countries are also pursuing separate negotiations with the United States to ease tariffs imposed during the Trump administration, which had disrupted global trade flows. The India–UK FTA is seen as a significant step toward deeper economic integration, offering long-term benefits for businesses and workers in both nations.
(Business Today)
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