India and the UK have finally reached the historic Free Trade Agreement (FTA) that has been under discussion for the past few years. This deal has been signed after 42 months, or approximately three and a half years, of negotiations. The agreement has been named the Comprehensive Economic and Trade Agreement (CETA). Both Prime Minister Narendra Modi and UK Prime Minister Keir Starmer were present on the occasion.
99 Percent of Indian Goods to Enter the UK Duty-Free
The biggest benefit of this deal for India is that 99 percent of Indian goods sent to the UK will now be exempt from customs duties. This specifically includes Indian textiles, footwear, gems and jewelry, seafood, and engineering products. This means these products can now be sent to the UK market more easily and at cheaper prices.
India to Reduce Taxes on 90 Percent of British Goods
On the other hand, India will significantly reduce taxes on the import of 90 percent of products coming from the UK. These include British whisky, high-end cars, aerospace equipment, and medical devices. This will further strengthen the presence of British products in the Indian market.
Modi Calls It a Model of Shared Prosperity
After signing the agreement, PM Modi said, "This is not just a trade agreement, but a b blueprint for shared prosperity between India and the UK." He said that Indian products will now have better access to the UK market, and British technology and equipment will be made accessible in India.
UK Parliament's Approval Still Pending
The Indian government has already approved this agreement, but it still needs to be passed by the UK Parliament. This is considered the largest and most detailed trade agreement between the two countries to date.
Bilateral Trade to Double
Both countries intend to double the bilateral trade between India and the UK from the current $56 billion by 2030. This agreement can serve as a b foundation in this direction.
Whisky and Cars to Become Cheaper
After this agreement, the prices of expensive whisky imported from the UK will gradually decrease. Currently, British whisky is subject to a 150 percent tax in India, which will be reduced to 40 percent over the next 10 years. Similarly, luxury cars coming from the UK will now be taxed at only 10 percent instead of 110 percent.
No Relief for EVs and Hydrogen Cars
However, electric vehicles, hybrid cars, and hydrogen-powered vehicles have been excluded from tax exemptions in this agreement. This means no concessions have been given on these eco-friendly vehicles for now. This decision will remain in effect for the next five years.
Dual Contribution Agreement Provides Relief to Indians
Along with CETA, India and the UK have also signed a Dual Contribution Agreement. Under this, 75,000 Indian professionals working in the UK will not have to pay double social security contributions for the next three years. This will reduce the tax burden on these people's earnings and increase savings.
India to Give British Companies Space in Government Procurement
In this agreement, India has, for the first time, promised to give British companies access to the Government Procurement Market. This means that British companies will now be able to participate in the Indian government's tender processes. However, security and strategic sectors have been kept out of this process.
No Solution on Carbon Tax
A major concern of India has not been resolved in this agreement. No clear policy has been given in this agreement regarding the Carbon Border Adjustment Mechanism (CBAM), i.e., carbon tax, which is to be implemented in the UK from 2027. India believes that this tax could put an additional burden on its industries.
New Partnership in an Era of Trade Wars
This deal has been finalized at a time when there is an atmosphere of geopolitical tension and trade wars in the world. A continuous tariff war is going on between the US, Europe, and China. In such a situation, this agreement between India and the UK is being considered a balanced and collaborative step on the global stage.
