Union Cabinet approves India-UK FTA to be signed by PM Modi in London: Read how the landmark deal will benefit India
The Union Cabinet approved the free trade agreement (FTA) between India and UK on Tuesday, 22nd July. The deal, officially called the Comprehensive Economic and Trade Agreement, is set to be signed on 24th July, in London during Prime Minister Narendra Modi’s four-day visit to the United Kingdom and the Maldives.
India’s Minister of Commerce and Industry, Piyush Goyal, will be joining PM Modi for the important visit. Although the agreement was announced on 6th May, the full text was held back pending final legal review.
The FTA is a comprehensive trade pact involving goods, services, innovation, government procurement, and intellectual property rights. It will have to be ratified by the British Parliament after signing. For India, this is a giant step in global trade diplomacy.
The main goal of the pact is to eliminate or reduce customs duties on imports and exports between the two nations. This should make Indian products competitive in the UK and vice versa. Both nations desire to increase their trade to USD 120 billion by 2030.
Key benefits for India
With the FTA allowing the elimination of tariffs on 99% of Indian tariff lines, covering nearly 100% of trade value, and reducing tariffs on 90% of UK tariff lines, the agreement is expected to deliver an estimated annual economic boost of £4.8 billion (US$6.4 billion) for the UK by 2040. This will help major Indian sectors like textiles, leather, marine products, footwear, toys, sporting goods, engineering products, gems and jewellery, auto parts, and organic chemicals. Since most of these are labor-intensive sectors, the deal is expected to create a massive amount of employment in India.
The agreement is in line with India’s focus on local production and exports. The agreement gives Indian products better access to the British market and allows the creation of jobs especially critical for the country’s growing youth population.
Social security relief and professional mobility
The FTA also targets freer movement of professionals between both nations. Indian professionals in fields like IT, finance, engineering, teaching, yoga, and even chefs and musicians will have improved access to employment opportunities in the UK.
Another standalone agreement, the Double Contribution Convention (DCC), has also been finalised. This will prevent Indian workers in the UK from contributing twice to social security systems for a period of up to three years. This will prevent Indian professionals who temporarily work in the UK from contributing to both the Indian and the UK systems. The savings thereby generated will be beneficial to both the workers and the employers.
Benefits for consumers
Both countries’ consumers will gain the advantage of lower prices and diversity of products. Indian consumers, for instance, will soon have lower chemists’ products, tea, and electrical items from the UK. UK consumers will get improved deals in terms of Indian apparel, seafood, and leather items.
The trade agreement also includes digital commerce and simplification of customs commitments, which will make trade easier and faster for businesses.
Sectors to monitor
Advanced manufacturing, automotive, beverages, clean energy, and life sciences will benefit in the UK. In India, there will be substantial gains in the textiles, leather, agriculture, and IT services industries. There will also be stronger supply chains and employment generation for both economies.
India’s exports to the UK rose by 12.6 per cent to USD 14.5 billion, while imports grew by 2.3 per cent to USD 8.6 billion in 2024-25. The bilateral trade between India and the UK increased to USD 21.34 billion in 2023-24 from USD 20.36 billion in 2022-23.
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