Last month, the UK and Indian governments finally put pen to paper to seal a long-awaited free trade agreement (FTA) between the two countries. The final text was signed as Indian prime minister Narendra Modi made a visit to London, meeting his UK counterpart Keir Starmer.
Talks had been ongoing since 2022 and the conclusion of the deal promises to give trade between the nations a significant boost. According to the UK government, it will benefit the British economy by as much as £4.8 billion a year, with bilateral trade increasing by £25.5 billion a year in the long run.
Speaking at the deal signing, Mr Modi said: "Today marks a historic day in our bilateral relations". He added: "This agreement does not only pave the way for economic partnership, but is also a blueprint for our shared prosperity."
Meanwhile, Mr Starmer described it as a "major win for Britain".
So what does the deal include, which sectors may be best-placed to benefit, and what could it mean for the future of international trade?
The India-UK FTA at a glance: Key points
At the heart of the deal are significant reductions in tariffs on a wide variety of goods travelling in both directions. India is set to eliminate or reduce tariffs on 90 per cent of product lines for UK imports. The UK, meanwhile, will cut duties on 99 percent of items coming from India.
Other key aspects of the deal include:
- Tariffs on UK whisky and gin to be cut from 150 percent to 75 percent immediately upon implementation, before further reducing to 40 percent after ten years.
- Vehicle duties on UK cars to be reduced from over 100 percent to ten percent under a quota system.
- Tariffs on food products such as UK lamb, chocolate, soft drinks and biscuits to be cut from 33 percent to zero.
- Tariffs on Indian clothing and textiles, leather goods and footwear imports to be eliminated.
- Advanced manufactured goods from the UK including aircraft parts, electrical circuits and conductors, high-end optical products, machinery, tools and medical devices to benefit from reduced tariffs or immediate duty-free access.
- Indian cosmetics and toiletries including soaps, shaving cream, face cream and nail polish to have tariffs either removed on day one or phased out over ten years.
In addition to the tariff reductions, the agreement aims to streamline customs procedures by reducing administrative burdens and physical paperwork. It commits both countries' customs authorities to release goods within 48 hours, providing all requirements are met.
What does the deal mean for the UK and India's trade relations?
Overall, the UK government estimates its exports to India will see a reduction in weighted average tariffs from 15 percent down to three percent, with sectors including food and drink, automotive and high-tech manufacturing among the major winners. The deal is the third trade agreement the UK has negotiated from scratch since leaving the EU and is by far the largest, indicating the UK's ongoing efforts to forge new ties as an independent trading nation.
For India, the deal is one of its first comprehensive FTAs with an advanced economy - with the UK and India the world's fifth and sixth-largest markets respectively. This may mark a significant milestone for New Delhi, which has until recently resisted large bilateral trade deals. The removal of high tariffs and other regulatory barriers could also set a blueprint for other deals.
This is something that may be especially significant as it faces turbulence in other markets. The US recently doubled its tariffs on Indian imports to 50 percent in response to India's continued purchases of Russian oil, with this set to come into force on August 27th.
Some experts have suggested this could cause India to rethink its strategic trade ties, which could mean closer cooperation with other members of the BRICS group, potentially setting up a significant new trade bloc.