India and UK sign historic Free Trade Agreement, set to boost annual trade by $34 bn

India and the UK signed their long-awaited Free Trade Agreement on Thursday, which will boost bilateral trade by around $34 billion annually.

The deal was formalised in presence of Prime Minister Narendra Modi and his British counterpart Keir Starmer.

After the FTA, 99% of Indian exports to the UK would see duties eliminated to zero including for textiles, generic drugs and medical devices, leather goods and agricultural and chemical products, according to documents provided to reporters by Indian officials.

The deal will also make it easier for British firms to export whisky, cars and other products to India besides boosting the overall trade basket, according to officials. For India, it’s the most significant trade deal the country has ever signed, and shows the South Asian nation’s willingness to lower barriers as it seeks to lure investments.

The deal comes at a time when New Delhi is negotiating with major trade partners including European Union and the US, which is pushing for greater market access to the world’s most-populous nation through tariff threats.

As part of the deal, India will reduce 90% of its tariff lines, and its average levy on UK products will drop to 3% from 15%. The country will immediately cut its tariff on Scotch whisky in half to 75%, with that level falling to 40% in a decade. It will also agree to a quota-based tariff reduction on electric vehicles, with the headline level falling to 10% from 110%.

Indian farm products will get tariff parity with major European exporters like Germany, while zero duties on textiles and leather are expected to boost India’s competitiveness among regional peers such as Bangladesh and Cambodia, the documents said. India’s leather sector is projected to gain an additional market share of 5% in the UK within the next two years, they said.

Similarly, projections show that electronics and engineering exports are likely to double by 2030; chemicals exports may increase 30%-40% in the next fiscal year; while gems and jewelery exports are expected to double — from the current $941 million — in the next three years, the documents said.

Meanwhile, software services exports are estimated to increase around 20% annually once the trade pact is in effect. British officials said the deal could help to bring prices down for consumers.

“Our landmark trade deal with India is a major win for Britain,” Starmer said in the statement. “It will create thousands of British jobs across the UK, unlock new opportunities for businesses and drive growth in every corner of the country.”

Starmer on Thursday will also welcome almost £6 billion of “new investment and export wins” for Britain, according to the statement. That will create more than 2,200 UK jobs nationwide as Indian firms expand their UK operations, the premier’s office said.

UK officials estimate the deal will increase UK exports to India by almost 60% over the long term. It will also include a procurement section, allowing British firms to bid for federal-level contracts in India, which will be welcomed by the UK’s dominant services sector. In recognition of the importance of financial services to the UK economy, it will also include a chapter on that sector, ensuring UK financial services companies are treated on an equal footing with domestic suppliers.

There will also be a chapter on intellectual property. Concerns had previously been raised that the UK would insist on India tightening its intellectual property standards which could impact its provision of cheap pharmaceuticals, but officials who did not wish to be named discussing unpublished documents told Bloomberg that the deal would not hinder India’s provision of generic drugs.

After the deal is signed, it will need cabinet approval in India and will have to be ratified by the UK Parliament. A separate bilateral investment treaty between the two countries is still under negotiation.