India-UK Free Trade Agreement: Exploring Tariff Reductions, Employment Opportunities, and Market Access
India and the United Kingdom are poised to finalize a comprehensive free trade agreement during Prime Minister Narendra Modi’s visit to London on Thursday. This landmark deal, the result of three years of negotiations, aims to significantly reduce tariffs and enhance service sector opportunities for both nations. While the agreement promises substantial benefits for exporters and professionals, it still awaits approval from the British Parliament and India’s federal cabinet before it can be fully enacted.
Duty-Free Access for Indian Goods
Under the new trade agreement, the UK will grant duty-free access to 99% of Indian products, encompassing nearly the entire trade value between the two countries. This move is expected to particularly benefit India’s labor-intensive sectors, including textiles, footwear, gems and jewelry, furniture, auto components, and engineering goods. Currently, many of these products face UK duties ranging from 4% to 16%. The Indian commerce ministry has highlighted that this access will enhance the competitiveness of Indian exports in the UK market, providing a significant boost to local manufacturers and exporters.
Significant Tariff Reductions on UK Imports
In return, India will reduce tariffs on nearly 90% of goods imported from the UK. Notably, the tariffs on British whisky and gin will see a dramatic decrease from 150% to 75% immediately, with a gradual reduction to 40% over the next decade. Additionally, automobile tariffs on certain UK-made vehicles will drop from over 100% to 10% under a quota system. Other products, including salmon, medical devices, chocolates, biscuits, and cosmetics, will also benefit from reduced import duties, making them more affordable for Indian consumers.
Enhanced Opportunities for Indian Professionals
The agreement also paves the way for greater access for Indian professionals in the UK. Chefs, yoga instructors, musicians, and other service providers will enjoy assured temporary access to the UK market. Business visitors, investors, and intra-corporate transferees will benefit from relaxed entry rules. Furthermore, Indian workers temporarily assigned to the UK will be exempt from social security contributions for up to three years, potentially saving them and their employers around Rs 40 billion (approximately $463 million) annually.
Mutual Benefits for Indian and British Companies
The trade pact is expected to create significant opportunities for both Indian and British companies. Indian exporters, including well-known brands like Welspun India, Raymond, and Tata Motors, are likely to gain from the duty-free access to the UK market. Conversely, British firms such as Diageo and Aston Martin will benefit from lower tariffs and improved access to India’s expanding market. Additionally, the agreement will allow UK companies to bid on Indian federal government procurement tenders valued at over Rs 2 billion in non-sensitive sectors, which the UK estimates to be worth about £38 billion annually. The UK government anticipates that this deal could contribute an additional £4.8 billion ($6.5 billion) to its GDP each year, benefiting consumers in both nations through lower prices on imported goods.
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