Starmer and Modi Finalize £6 Billion India-UK Trade Agreement
Indian Prime Minister Narendra Modi has signed a free trade agreement with UK Prime Minister Sir Keir Starmer, marking a multi-billion pound boost in exports between the two nations.
Under the deal, UK-made cars and whisky will become more affordable to export to India, while Indian textiles and jewellery will be cheaper to sell in the UK. The agreement, which took three years to finalize, also includes a joint plan to address illegal migration.
Critics had expressed concerns that the deal might undercut British workers due to extended social security provisions. However, UK Business Secretary Jonathan Reynolds dismissed these claims as “completely wrong,” stating that Indian workers on temporary assignments in the UK will receive the same terms already granted to workers from many other countries.
Speaking at the signing ceremony held at the UK Prime Minister’s country residence, Chequers, Sir Keir Starmer described the UK-India agreement as “the largest and most economically significant” trade deal Britain has struck since leaving the European Union.
“This deal is now signed, sealed, and delivered,” he declared. “While successive governments have worked toward an agreement like this, it was this administration that got it over the line. With this deal, we’re sending a strong signal that Britain is open for business — and that message is already inspiring confidence.”
Sir Keir announced that the agreement is expected to create over 2,200 jobs across the UK, as Indian companies expand their operations and British firms gain new opportunities in the Indian market.
He emphasized that the trade deal is just the beginning of deeper ties, noting that the UK and India share “unique bonds of history, family, and culture” and expressing a desire to strengthen that relationship even further.
Indian Prime Minister Narendra Modi praised the deal as “a blueprint for our shared prosperity.”
“Indian textiles, footwear, gems and jewellery, seafood, and engineering products will gain improved access to the UK market,” he said. “Meanwhile, people and industries in India will benefit from affordable and competitive UK exports such as medical devices and aerospace components.
UK-India Trade Deal Set to Boost British Economy by £4.8 Billion Annually
The UK government has announced that the new trade agreement with India, unveiled in May after years of negotiations, is projected to add £4.8 billion a year to the British economy.
Though the deal has been approved by India’s cabinet earlier this week, it still awaits ratification by the UK Parliament. Full implementation is expected to take at least a year.
Key Tariff Reductions
Under the agreement, tariffs will be lowered or eliminated on a wide range of goods. UK exports set to benefit include:
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Gin and whisky
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Aerospace components, electrical equipment, and medical devices
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Cosmetics
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Lamb, salmon, chocolates, and biscuits
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Luxury cars
Meanwhile, UK imports from India will also become cheaper, particularly:
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Clothing and shoes
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Cars
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Frozen prawns and other food items
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Jewellery and precious stones
Indian manufacturers will gain better access to the UK market for electric and hybrid vehicles.
Economic Growth and Export Expansion
The British government highlighted the agreement’s potential to fuel economic growth and create jobs by boosting UK exports to one of the world’s fastest-growing markets. Currently, the UK imports £11 billion worth of goods from India. The deal is expected to make Indian components more affordable, particularly for advanced manufacturing sectors.
Tariffs on UK exports to India will be slashed from an average of 15% to just 3%, making British goods far more competitive in the Indian market. Notably, whisky tariffs will drop from 150% to 75% immediately, with a further reduction to 40% by 2035—giving the UK a strong advantage over international rivals.
Broader Cooperation Beyond Trade
The agreement also includes new commitments on defence, education, climate, technology, and innovation. Both nations have agreed to enhance intelligence sharing and collaborate on tackling corruption, organised crime, serious fraud, and irregular migration.
A new criminal records sharing agreement is also in the works, which will support judicial cooperation, maintain accurate watchlists, and enforce travel bans.
Social Security and Worker Protections
The deal provides an extended exemption from national insurance contributions, which India called “an unprecedented achievement.” Under the agreement, employees temporarily transferred between the two countries will only pay social security in their home country. The UK noted this aligns with similar agreements it already has with 17 countries, including the US, EU, and South Korea.
Responding to concerns about undercutting British workers, Business Secretary Jonathan Reynolds told BBC Breakfast, “There is no tax advantage for hiring an Indian worker over a British worker.” He clarified that additional costs like visa fees and the NHS surcharge mean hiring Indian workers could actually cost more.
Challenges and Ongoing Talks
While the UK secured significant tariff cuts, it did not gain as much access as it had hoped to India’s financial and legal services sectors. Talks are continuing toward a bilateral investment treaty to protect mutual investments.
Discussions are also ongoing regarding the UK’s planned tax on high-carbon industries, which India fears may unfairly impact its exports.
Political Reactions
Prime Minister Narendra Modi’s visit marks his fourth to the UK since 2014. This deal follows the UK-India Technology Security Initiative, signed last year, which promoted cooperation on telecoms security and emerging technologies.
The trade deal negotiations began in 2022 under former Prime Minister Boris Johnson. Conservative Shadow Business Secretary Andrew Griffith praised the deal as a Brexit benefit and "a step in the right direction." However, he warned that its gains could be offset by what he described as the Labour government’s “union charter,” increased business regulations, and potential tax hikes by Chancellor Rachel Reeves.