India and the UK agreed to a landmark trade deal slashing tariffs on cosmetics, vehicles, alcoholic beverages and other goods, as both sides look for wins to offset the disruption of President Donald Trump’s protectionist policies.
Prime Minister Keir Starmer and Indian counterpart Narendra Modi touted the prospect for expanding a £42.6 billion ($57 billion) trading relationship on Tuesday while announcing the deal — the UK’s biggest such agreement since Brexit and India’s first with a European economy. Starmer accepted Modi’s invitation to visit India at the “earliest opportunity” to affirm the pact, which was the culmination of more than three years of talks under four British prime ministers.
Both Starmer and Modi are seeking to insulate themselves from Trump’s trade wars, even as they jockey for separate agreements with Washington to minimize the impact of his tariffs. Still, the agreement would likely only add about 0.1% to UK economic output in the long run, according to Bloomberg Economics calculations.
“Compared with the big things like Trump taking a bazooka to the global trading system, and Brexit, this is tiny,” said Alan Winters, a trade expert and emeritus professor at the University of Sussex. “It reconfirms the notion that, while nice, deals with countries far away are not the issue. The real issues are trade with the European Union and the global system in the eyes of Donald Trump.”
For India, which eclipsed Britain as the world’s fifth-largest economy in 2021, the deal burnishes its credentials as an alternative investment destination to China. Britain has been eager to show it has options in the wake of its exit from the European Union and, more recently, Trump’s tariffs. More than 1.9 million people of Indian descent live in Britain, which ruled over the subcontinent until 1947.
The UK’s Department of Business and Trade UK said Indian consumers would gain cheaper access to British cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate and biscuits, it said. Britons, in turn could see lower prices on clothing, footwear and food products, it said.
The UK said some 90% of tariff lines will be reduced for British exports to India, including 85% that will be fully tariff-free within a decade. Whisky and gin tariffs would be halved to 75% before reducing to 40% by the 10th year of the deal, while automotive industry tariffs will reduce to 10% — under a quota — from 100% over that period, it said.
Meanwhile, India has won reductions on about 99% of tariff lines for goods it ships to the UK, according to a person with knowledge of the matter. The South Asian nation has also secured market access for services including information technology, and has agreed a mechanism with the UK that will allow it to seek recourse in case of exports impacted by Europe’s carbon-emission rules, the person said, asking not to be identified ahead of the formal announcement.
The deal is also the first major free trade pact signed by the Modi government in a decade and will act as a stepping stone for its ongoing negotiations with the European Union. An email to the Commerce Ministry wasn’t immediately answered outside of business hours in India.
The UK’s main opposition Conservative Party immediately seized on an exemption from national insurance payments for Indian workers staying for less than three years, with their shadow business secretary, Andrew Griffith saying on X “Every time Labour negotiates, Britain loses,” and Shadow Justice Secretary Robert Jenrick saying on the same platform: “Starmer has hiked National Insurance on Brits while giving an exemption to Indian migrants. British workers come last in Starmer’s Britain.”
Business Secretary Jonathan Reynolds, however, said the tax break goes both ways and would ensure there was no double taxation on Britons temporarily working in India or vice versa. Moreover, he added that the UK was merely extending to India “arrangements we have with a whole range of existing partners.”
Reynolds also said the deal gives British companies access to Indian government procurement contracts — which he described as an “exciting opportunity” that positions the country well for the future.
The two countries still need to iron out legal texts, before submitting the pact through their respective domestic ratification processes. Reynolds said he expected to take about 12 months for the deal to take effect.
Total trade in goods and services between the UK and India was £42.6 billion in 2024, according to data from the British government, making India the UK’s 11th largest trading partner. The UK said it expected the trade deal with India to boost bilateral trade by £25.5 billion a year over the long run.
Britain is also in talks for a deal with Trump’s administration and is seeking closer economic ties again with the European Union, its largest trading partner, following its divorce from the bloc at the end of 2020.
Rain Newton-Smith, chief executive of the Confederation of British Industry, said the trade deal with India was a “beacon of hope amid the specter of protectionism.”
