India and the United Kingdom (UK) on Thursday signed a historic free trade agreement (FTA) that is expected to boost annual trade between the two countries by about $34 billion. The agreement was signed during Prime Minister Narendra Modi’s visit to London, accompanied by Commerce Minister Piyush Goyal from India and Trade Secretary Jonathan Reynolds from the UK.
This is India’s biggest and most ambitious trade deal in the last ten years, while it is the UK’s first major international agreement after Brexit. The governments of both countries have described it as a milestone in economic cooperation.
Prime Minister Modi described it as a “guide to shared prosperity”. The agreement will benefit several stakeholders, including farmers, fishermen, small entrepreneurs and professionals. Products such as clothing, jewellery, marine products, leather, engineering goods and processed food from India can now be shipped to the UK almost duty-free.
On the other hand, import duties in India on goods imported from the UK such as medical equipment, aerospace parts, cars, whiskey, chocolates and cosmetics will be reduced from an average of 15% to around 3%.
Massive benefits And New Possibilities
Agneswar Sen, EY India’s head of trade policy, called it a transformative agreement that will completely open up trade between India and the UK. According to him, the reduction in duties on Indian products will boost employment and production in labor-intensive sectors. Apart from this, service sector professionals will get important benefits like relaxation in visa rules and exemption in social security.
Sen said that this agreement will benefit consumers of both countries with better choices and affordable prices. It lays the foundation for long-term cooperation between two strong economies, not just limited to trade.
The leather industry is expected to get an additional 5% market share in the UK in the next two years. Engineering and electronics exports may double by 2030, while chemical industry exports may grow by 40% next year. Software services can grow at a rate of 20% every year.
Indian Professionals Will Get Benefits
Under this agreement, Indian professionals in 35 sectors will now be able to work in the UK for two years without the need for a local office. This will open doors to new possibilities for freelancers, chefs, musicians, yoga instructors and people doing contract-based work. It is estimated that more than 60,000 IT professionals can benefit from this initiative every year, especially those associated with big organizations like TCS, Infosys, Tech Mahindra, HCL and Wipro.
Another major provision is that professionals from India going to the UK on short-term work will not have to contribute to social security there – this exemption will be valid for three years. In an interview with India Today, Puneet Gupta, partner at EY India, said this provision will be financially beneficial for companies and employees and will simplify compliance.
Benefits For The UK
From the UK’s point of view, this agreement will make 90% of its exports to India cheaper, 85% of which will become completely duty-free in the next ten years. In addition, UK companies will be able to participate in non-sensitive government tenders of the Government of India worth more than Rs 2,000 crore, giving them access to about 40,000 tenders every year. This is expected to create about 2,000 new jobs in the UK and salary increases of 2.2 billion pounds.
The agreement also includes special provisions for sectors such as financial services and intellectual property. UK financial companies will get the same status as Indian companies. Also, it has been ensured that there is no impact on the availability of affordable medicines from India.
UK Prime Minister Keir Starmer called the agreement a major success for Britain and said that it would bring thousands of jobs and increase investment. Additionally, 26 UK companies will start their business in India, while Indian companies have committed to invest about 6 billion pounds in the UK.
