India and UK Finalize Landmark Multi-Billion Dollar Trade Agreement
In a significant development for international trade, India and the United Kingdom have formalized a free trade agreement (FTA) aimed at boosting bilateral trade to $120 billion by 2030. The agreement was signed during Indian Prime Minister Narendra Modi’s visit to the UK, with UK Prime Minister Keir Starmer present. This landmark deal, which was initially agreed upon in May, is expected to reduce tariffs on various goods and enhance trade relations between the two nations.
Key Features of the Trade Agreement
The India-UK FTA is designed to provide substantial benefits to both countries. Under the agreement, 99% of Indian exports will gain duty-free access to British markets. This arrangement is expected to eliminate or significantly reduce customs duties on a wide range of traded goods. The FTA encompasses various sectors, including goods, services, innovation, government procurement, and intellectual property rights.
One of the notable provisions of the agreement is the reduction of import duties on UK-produced whisky and gin, which will be halved from 150% to 75%, with a further decrease to 40% over the next decade. Additionally, tariffs on automobiles will be significantly lowered from over 100% to 10%, subject to quota restrictions. The agreement also aims to facilitate market access for Indian businesses and consumers by reducing import duties on products such as cosmetics, aerospace components, and medical equipment.
Impact on Employment and Exports
The FTA is expected to create new export opportunities for various sectors in India, particularly those that employ a large workforce. Industries such as textiles, marine products, leather goods, and automotive components stand to benefit significantly from this agreement. The deal will not only enhance trade but also support job creation in these sectors, which are crucial for the Indian economy.
Furthermore, the services component of the trade deal will allow for the movement of a diverse range of professionals, including yoga instructors, musicians, and chefs. Business visitors, investors, and contractual service suppliers will also benefit from easier access to the UK market, along with their partners and dependent children who will be granted the right to work.
Next Steps and Future Prospects
While the agreement has been signed, it still requires the endorsement of the British Parliament before it can be implemented. This process is expected to take approximately one year. The anticipation surrounding the FTA reflects the growing economic ties between India and the UK, with India’s exports to the UK having already increased by 12.6% to reach $14.5 billion in the 2024-25 fiscal year.
The trade volume between the two nations has also shown promising growth, expanding to $21.34 billion in 2023-24, up from $20.36 billion the previous year. As both countries move forward with the implementation of this agreement, the potential for enhanced economic collaboration and mutual benefits remains significant.
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