India-UK FTA Sealed: Major Tariff Cuts on Auto, Alcohol, Boost for Services Mobility

India and the UK on May 6, 2025, concluded a landmark Free Trade Agreement (FTA) and Double Contribution Convention after three years of negotiations. Marking India’s first such deal with a Western nation, the FTA aims to deepen economic ties, with bilateral trade currently around $60 billion, expected to double in five years. The UK projects a £25.5 billion trade boost and significant economic gains.

Reciprocal Tariff Reductions Detail

A core component of the agreement involves reciprocal cuts to import duties. India has agreed to make notable reductions on key items from the UK. Automobile tariffs, currently exceeding 100 percent, will be drastically reduced to 10 percent, accompanied by a quota on British car imports. Tariffs on the UK's prominent spirits, such as whisky and gin, will be halved from 150 percent to 75 percent initially, with a plan for further reduction to 40 percent during the tenth year of the deal.

India will also lower import duties on other UK products, including cosmetics, medical devices, lamb, salmon, soft drinks, chocolate, and biscuits. Overall, New Delhi will lock in cuts on 90 percent of tariff lines, with 85 percent becoming tariff-free within a decade. British manufacturers in sectors like aerospace and high-end optical products are also expected to gain improved access to the Indian market. In return, the UK has committed to reducing tariffs on Indian exports such as clothes, footwear, and various food products, including frozen prawns. The Ministry of Commerce and Industry stated that the India-UK FTA provides comprehensive market access, eliminating tariffs on nearly 99% of tariff lines, covering almost all of India’s trade with the UK. Key sectors benefiting include textiles, marine products, leather, footwear, gems and jewellery, auto parts, and organic chemicals. Sensitive items like dairy, apples, and cheese remain excluded from duty concessions.

Easing Services Trade and Mobility

The India-UK FTA also covers services and professional mobility, easing entry for contractual service suppliers, business visitors, investors, intra-corporate transferees (and dependents), and independent professionals like musicians, yoga instructors, and chefs. Additionally, the Double Contribution Convention exempts Indian workers and employers from UK social security contributions for three years, yielding estimated savings of 20% for workers and ₹4,000 crore for employers.

Broader Strategic Context

For India, concluding this FTA represents achieving the first of three major trade deals currently under negotiation with Western countries, the others being with the US and the European Union. While India signed a trade deal with the European Free Trade Association (EFTA) last year, the agreement with the UK is its first bilateral Western deal. For the UK, Prime Minister Keir Starmer's Labour Party has highlighted it as the "biggest and most economically significant bilateral trade deal" since the UK exited the European Union.

In addition to core economic chapters, the agreement also incorporates commitments on areas such as anti-corruption, consumer protections, labour rights, and gender and development. The successful conclusion of the India-UK FTA signifies a significant step in bilateral economic relations, promising enhanced market access and reduced trade barriers for businesses in both nations.

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