Amid all the trade tensions in the world, courtesy of the POTUS, India and the UK signed a $34 billion free trade agreement (FTA) on Thursday during the visit of the Prime Minister of India, Narendra Modi. The trade agreement will reduce tariffs on goods such as textiles, whiskey, and cars, among many other sectors. This will allow more access for businesses.
This FTA has been long in making but was finalised in May after three years of stop-start negotiations. However, as Donald Trump’s tariffs engulf the world, India and the UK fast-tracked their attempt to do an FTA.
The Prime Minister of the UK, Keir Starmer, said that the deal will bring “huge benefits” for both countries, streamlining the trade. He also said, “We’ve entered a new global era, and that is one that requires us to step up, not to stand aside… by building deeper partnerships and alliances.” On the other hand, PM Modi also shared his thoughts and said his visit will “go a long way in advancing the economic partnership between our nations.”
Under the free trade agreement, several commodities are expected to experience a price decrease as duties are significantly reduced. For instance, the tariff on Scotch Whiskey will drop from 150% to 75%, with provisions to decrease further to as low as 40% within the next 5 years or so. The same tariff cut is announced for high-end EVs and large internal combustion engine cars. However, in the case of cars, the tariff can go as low as 10% shortly. Although the deal was first signed in May, the fine lines were agreed upon after PM Modi’s visit.
A big sector that has opened up for India is the Pharma industry of the UK. India exports almost $24 billion, with only $1 billion of that going to the UK. Now, India has an opportunity to make a mark on the UK’s $30 billion pharma market.
Overall, this FTA marks a new era of trade between the world’s 5th and 6th-largest economies and will bring prosperity to both nations. Moreover, deals like this ensure that both nations are minimally affected by the tariffs that have been in place for quite some time now.
