New Delhi: The highly anticipated Free Trade Agreement (FTA) between India and the United Kingdom (UK) is set to be formally signed on July 24 during Prime Minister Narendra Modi's visit to London. This agreement will give a new dimension to trade and investment relations between the two countries.
This will be India's first major bilateral trade agreement with a developed country in a decade. The agreement is expected to come into effect in the next 12 months, subject to formal approval from the parliaments and cabinets of both countries.
Major Relief in Tariffs, Many Foreign Products Cheaper
Under the FTA, both countries have agreed to cut import duties in several key sectors:
- Scotch Whisky and Gin: The existing 150% import duty on these in India will be reduced to 75%, and further reduced to 40% over the next 10 years.
- British Cars: Duties on luxury vehicles imported from the UK, currently over 100%, will be reduced to 10%, but this will be under a quota-based system.
- Other Products: India will also cut import duties on chocolate, biscuits, cosmetics, salmon fish, and medical equipment.
Large Market Open for Indian Exporters
India will get duty-free access to the UK market for 99% of its products under this agreement. Indian exporters are expected to benefit greatly from this:
- Textiles and Apparel: Exports from hubs like Tirupur, Surat, and Ludhiana will be strengthened.
- Footwear Industry: Footwear manufactured in centers like Agra, Kanpur, and Chennai will get zero-duty entry into the UK market.
- Electric Vehicles and Auto Parts: Companies like Tata Motors and Mahindra Electric will benefit, as they will get access to the UK under preferential quotas.
- Gems and Jewelry: Exporters from Gujarat and Maharashtra will directly benefit from the removal of up to 16% duty.
- Medicines and Medical Equipment: Indian pharmaceutical companies will get regulatory easements and better market access in the UK.
- Machinery, Toys, Sporting Goods, Chemicals, and Furniture: Exporters in these sectors will also get tariff relief.
What the UK Will Gain from This Agreement
- Liquor and Luxury Cars: Scotch from companies like Diageo and car brands like Aston Martin will get a better market in India.
- Professional Service Entry: Yoga trainers, chefs, musicians, and other Indian professionals will find it easier to obtain short-term UK visas.
- Social Security Relief: Indian professionals temporarily working in the UK will be exempt from social security tax for 3 years, resulting in an estimated annual saving of ₹4,000 crore.
- Access to Government Procurement: UK companies will be able to bid in Indian government tenders above ₹200 crore, provided they are not in sensitive sectors.
What Will Be the Impact on the Economy
The British government estimates that this agreement will increase the UK's GDP by £4.8 billion (approximately ₹51,000 crore) every year. For India, this agreement will also help double exports to the UK by 2030.
Currently, there are more than 1,000 Indian companies in the UK, employing over 100,000 people. These companies have invested $20 billion in the UK to date. On the other hand, the UK has invested $36 billion in India, making it India's sixth-largest foreign investor.
