The United Kingdom and India have finalized a significant trade agreement, marking a pivotal moment in their economic relationship amid escalating global trade tensions. New British PM Keir Starmer attends his first G20 Summit since succeeding Liz Truss in office. At the time of the summit, the Free Trade Agreement (FTA) and Double Contribution Convention were successfully concluded. This agreement, which is projected to save both countries nearly a billion dollars, will strengthen trade ties between the two countries and grow their economies.
Prime Minister Narendra Modi made the completion of the deal known on X (formerly Twitter). He stressed that this deal will strengthen ties between India and the U.K. The agreement’s stated purpose is to greatly increase bilateral trade. It is projected to contribute at least £25.5 billion ($34 billion) to the countries’ economic growth. The U.K. government indicated that the majority of goods traded will be tariff-free within a decade, fostering a more accessible trade environment.
For example, the agreement reduces tariffs on U.K. exports such as whisky and gin from 150% to 75%. Over the next decade, we hope to see those tariffs fall even more to 40%. Automotive tariffs, currently above 100%, are set to immediately drop to 10%.
Significance Amid Trade Tensions
By the end of 2024, the U.K. faced an £8.4 billion trade deficit with India in goods and services. Nonetheless, trade between the two countries reached record heights of £42.6 billion, an incredible 8.3% up on last year. India is the U.K.’s 11th biggest trading partner. This agreement could not have come at a more crucial time in light of increasing trade aggression from the United States, including their recent hike of global import tariffs.
Keshav R. Murugesh, chairman of the Confederation of Indian Industry UK Business Forum, called the significance of this deal “huge.” He pointed out its importance, particularly during this time of increasing trade tensions. He stated that “the timing couldn’t be better, with the FTA enhancing the economic resilience of both the UK and India by providing access to new markets and reducing vulnerability to external shocks.”
Starmer expressed optimism about the agreement, stating, “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.”
Modi highlighted the collaborative spirit behind this agreement, asserting, “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.” He further noted that these landmark agreements would “catalyse trade, investment, growth, job creation, and innovation in both our economies.”
As Prime Minister Starmer engages in discussions with various leaders at the G20 Summit, including President Xi Jinping of China, marking the first such talks by a U.K. Prime Minister in six years, this trade agreement serves as a vital stepping stone for future economic collaborations.
What The Author Thinks
This landmark trade agreement between the UK and India demonstrates the growing potential for international collaboration, especially in a time of increasing trade tensions globally. By reducing tariffs and opening new markets, both nations are positioning themselves for long-term growth and resilience. The move is a clear step toward strengthening economic ties, not just between the two countries, but with a broader vision for international commerce.
Featured image credit: Number 10 via Flickr
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