The signing of a free trade agreement (ALE) between India and the United Kingdom, following discussions that started in 2022, marks an important step. Prime Minister Narendra Modi praised the agreement as a historic moment, while the Minister of Commerce, Piyush Goyal, noted that the trade agreement establishes a new standard for fair and ambitious trade.
Officials from the two countries highlighted the complete nature of the agreement compared to previous Indian trade agreements. Indian companies will benefit from almost without pricing in British markets, and Indian consumers can expect a gradual drop in prices on imports from the United Kingdom.
A senior government official has told Business Today, the most significant advantage of the Indian-UK free trade agreement (ALE) is that it offers zero service to almost 99% of pricing lines and almost 100% of bilateral commercial value, representing a major breakthrough in India’s commercial diplomacy.
This change will have a significant impact on the accessibility of premium engineering products such as cars, as well as foods such as Scottish whiskey, gin and lamb. In addition, it will create opportunities for cross -border supply, potentially leading to cost savings and an improvement in the efficiency of public spending.
He added that the FTA also includes commitments concerning digital services and addresses non -tariff barriers. In addition, there is a provision for a limited but prolonged transition period for electric vehicles (EV).
In a free trade agreement, participating countries agree to reduce or eliminate customs duties on most negotiated goods, as well as reduce non-tariff obstacles to important imports from each other. In addition, these agreements involve simplifying regulations to facilitate trade in services and cross -border investments.
Free trade agreements (ALE) offer various strategic advantages for the countries involved. They allow franchise access to partners’ markets, allowing exporters to diversify and expand their export destinations. By receiving preferential treatment compared to non-AFT members, domestic exporters are able to compete on a playground, in particular on the markets where similar agreements are already in place.
Protruding facts from India-UK FTA
> The trade agreement guarantees franchise access to British markets for 99% of Indian exports, offering significant advantages to India.
> Almost all price lines, covering almost all the commercial value, will see the eliminated prices, offering substantial advantages.
> India will experience notable reductions in import rights, affecting 90% of pricing lines. During the next decade, 85% of these items will become completely without a price.
> In addition, India will benefit from the commitments of the UK free trade agreement in various service sectors, including IT services / ite, financial, professional and educational.
> By agreeing to reduce prices on products such as whiskey, medical devices, advanced machines and lamb, India will help eliminate trade barriers and improve the competitiveness of British exports.
> Motor prices should drop from more than 100% to 10% via a quota system. Whiskey import duties and Gin will also see a reduction of 150% to 75% initially, with a new drop to 40% over ten years.
> The FTA will lead to a drop in import duties on various products such as cosmetics, aerospace components, lamb, medical equipment, salmon, electric machines, carbonated drinks, chocolate and cookies, benefiting companies and consumers in India.
> An important step is the renunciation of three years on social security contributions for Indian workers employed in the United Kingdom. This derogation, under the double contribution agreement, will lead to significant cost savings for Indian service providers who send workers to the United Kingdom, improving their competitive advantage on the market.
The United Kingdom is expecting the trade agreement to increase bilateral trade by 25.5 billion pounds sterling per year from 2040. Trade between the two countries reached 42.6 billion Sterling pounds in 2024. Whitehall predicts that the free trade agreement (ALE) will contribute to 10 additional points of GDP growth each year.
In 2024, the United Kingdom exported 17.1 billion sterling pounds to India and imported 25.5 billion pounds sterling. India has been placed as the 11th British trading partner. The United Kingdom described the agreement as its most important bilateral trade agreement since Brexit in 2020.
