- New deal eases UK exports to India and lowers tariffs on Indian goods
- No changes to immigration or student visa policy included
- UK-India trade projected to grow by £25.5bn annually by 2040
The United Kingdom and India have finalized a major trade agreement aimed at boosting exports and reducing tariffs, after three years of negotiations.
The deal will make it easier for UK businesses to export goods such as whisky, cars, and medical devices to India, while also cutting import taxes on Indian exports like clothing and footwear. However, the agreement does not include any changes to immigration policy, including provisions for Indian students in the UK.
UK Prime Minister Sir Keir Starmer hailed the deal as a driver of economic growth, saying it would benefit both British businesses and the public. Trade between the two nations was valued at £42.6 billion last year, and the government projects the new agreement will boost that figure by £25.5 billion annually by 2040.
India’s Prime Minister Narendra Modi called the agreement a historic and ambitious step that will promote mutual trade, investment, job creation, and innovation.
Once implemented—potentially within a year—UK consumers can expect lower tariffs on Indian goods like clothing, seafood, jewellery, and cars. Conversely, Indian tariffs will be reduced on UK exports such as gin, whisky, aerospace products, medical devices, cosmetics, and premium vehicles.
Significantly, tariffs on UK-made luxury cars exported to India will drop from 100% to 10%, within a specified quota, and whisky tariffs will be halved initially, with further reductions over time.
The agreement also allows UK firms greater access to India’s services sector and public procurement contracts. A key feature is a three-year exemption from dual social security contributions for workers temporarily transferred between the two countries—a move described by India as “unprecedented.” This mirrors similar arrangements the UK has with countries like the US, South Korea, and EU nations.
Despite the government’s praise, critics have raised concerns. Opposition MP Kemi Badenoch dubbed it “two-tier taxes from two-tier Keir,” pointing to the recent rise in employer National Insurance contributions. Shadow trade secretary Andrew Griffith claimed the deal undersold British interests, and Liberal Democrat MP Daisy Cooper called for parliamentary scrutiny, questioning tax obligations for Indian firms operating in the UK.
The government insisted the social security exemption would not impact NHS funding, as Indian workers would still pay the immigration health surcharge.
With India poised to become the world’s third-largest economy, and the UK ranked sixth, the agreement strengthens ties between two major global players. It also signals support for free trade amid rising global protectionism, particularly in contrast to former U.S. President Donald Trump’s tariff-heavy policies.
Business groups welcomed the deal, with CBI chief Rain Newton-Smith calling it a “beacon of hope” and a counterweight to global trade barriers. Allie Renison of SEC Newgate noted the pact’s potential to be transformational, thanks to India’s size, economic growth, and high market entry thresholds.
