Landmark agreement slashes tariffs from 15% to 3%, grants zero-duty access to 99% of Indian exports
The proposed India-UK Free Trade Agreement promises to transform bilateral trade, adding $34 billion annually to current volumes. The comprehensive deal will reduce average tariffs on UK imports to India from 15% to 3%, while granting zero-duty access to 99% of Indian exports to Britain. Key sectors including automobiles, pharmaceuticals, and gems stand to benefit significantly.
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The FTA represents a major shift in Indo-UK economic relations, offering unprecedented market access and tariff reductions across multiple sectors. The agreement encompasses tariff cuts, enhanced mobility provisions, and guaranteed market access that could reshape trade dynamics between the two nations.
In the automotive sector, India has made significant concessions on luxury vehicles. Import duties on high-end cars will drop from the current 150% to 75% immediately, then gradually decline to 40% over ten years. Electric vehicles priced above £80,000 will gain special market access, though affordable EVs, hybrids, and hydrogen vehicles won't receive concessions in the initial five-year period.
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The pharmaceutical industry stands to gain substantially from the agreement. While India currently exports less than $1 billion in pharmaceuticals to the UK out of its global exports of $23.3 billion, the FTA opens up Britain's $30 billion pharmaceutical import market with zero-duty access. This could dramatically increase Indian pharma companies' market share in the UK.
Food processing and agricultural exports are set for expansion under 985 covered tariff lines. Current exports of $309.5 million could surge as instant coffee, tea, and spices gain preferential access to British markets. The zero-duty treatment will make Indian products more competitive against other suppliers.
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Electronics manufacturers will benefit from zero-duty treatment on smartphones, inverters, and optical fiber cables, potentially boosting India's position in the UK's technology supply chain. The gems and jewellery sector, currently exporting $941 million to the UK, could see exports double within 2-3 years as it taps into Britain's $3 billion annual import market.
India and the UK have been negotiating the FTA for several years, with talks intensifying after Brexit created new opportunities for Britain to forge independent trade relationships. The agreement builds on the Enhanced Trade Partnership signed in 2021 and represents both countries' ambitions to deepen economic ties beyond their historical colonial relationship.
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While the FTA framework appears finalized, formal signing and ratification processes are pending. Industry experts predict implementation could begin within the next fiscal year, with businesses already preparing to leverage new opportunities. The agreement is expected to create jobs, boost investments, and strengthen supply chains between India and the UK, marking a new chapter in bilateral economic cooperation.
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