Four things you need to know about UK-India trade deal

The UK and India have signed a trade deal to make it cheaper and easier to buy and sell goods and services to one another.

The hope is that the agreement will benefit the economies of both countries.

Sir Keir Starmer and India’s Prime Minister Narendra Modi together signed the agreement which the UK Prime Minister said was “a landmark moment for both of our countries”.

Here’s a quick guide to what’s been agreed and what it could mean for you.

The UK has lowered taxes on goods imported from India including:

• clothing and footwear
• food products including frozen prawns
• jewellery and gems
• some cars

India has cut taxes on goods imported from the UK including:

• cosmetics
• scotch whisky and gin
• soft drinks
• higher-value cars
• food including lamb, salmon, chocolate and biscuits
• medical devices
• aerospace
• electrical machinery

The deal will also allow British firms to compete for more services contracts in India.

The trade deal won’t come into force for up to a year, so don’t expect to notice any immediate changes.

Over time though, the UK government says lowering tariffs on the likes of clothing, jewellery, and frozen prawns “could” lead to cheaper prices and more choice.

This deal could also be a big win for UK businesses which manufacture the goods which have seen tariffs slashed, such as car makers and whisky distillers.

For example, tariffs on whisky and gin being imported to India from the UK will be halved from 150% to 75% before reducing to 40% by the 10th year of the deal.

Car tariffs will fall from more than 100% to 10%.

That will provide a boost to those two industries as it will mean Indian companies wanting to import those products will pay less import charges than before.

If businesses end up exporting more goods to India and make higher profits, this could lead to them spending more on hiring staff, investing and also paying more tax.

In India, consumers could see much more choice among the goods which have been included under the deal. Clothing manufacturing businesses and jewellers will also be able to access the UK market which will boost their margins.

This deal has been a long time in the making, with on-off negotiations going on for some three years.

However, it appears US President Donald Trump’s introduction of tariffs on goods entering America has prompted other world leaders to consider striking free-trade deals with one another.

The UK’s deal with India is its third biggest after its agreements with Australia and Japan. For context, the UK has signed trade deals and agreements in principle with about 70 countries and one with the EU.

The EU is the biggest trade partner for both the UK and India. Therefore, a free trade agreement between India and the EU would be more significant than the one with the UK. Both India and the EU have said they aim to finalise this by the end of 2025.

Last year trade between the UK and India totalled £42bn. The UK government has said this deal would boost that trade by an additional £25.5bn a year by 2040.

It is said over time it will boost the UK economy by £4.8bn. This is a tiny proportion of the UK economy which was worth £2.8 trillion last year.

However, India is also forecast to become the world’s third-largest economy in a few years. It is also home to 1.45 billion people – about 20 times the population of the UK – which is a lot of potential customers.

The UK is also a high priority trading partner for India, which has an ambitious target to grow exports by $1tn (£750bn) by 2030.

One of the reasons the UK India free trade deal has taken so long to reach is that India had made big demands about visas for Indian professionals and students to work and study abroad.

The British government said does not include any change in immigration policy, including towards Indian students studying in the UK.

But it does includes a three-year exemption on the social security paid by Indian employees working in the UK, on short-term visas. They will only pay social security contributions in their home country.

This agreement, known as the Double Contribution Convention (DCC), designed to ensure social security contributions are not made in more than one country.

The UK has similar reciprocal DCC agreements with 17 other countries including the EU, the US and South Korea.

Business Secretary Jonathan Reynolds said it did not mean Indian workers will be cheaper to hire than British staff.

“There is no tax advantage for hiring an Indian worker over a British worker,” he told the BBC.

Extra costs for visas and the NHS surcharge would mean “you’d actually pay more for an Indian worker”, he said, adding “no-one is being undercut”.