Modi begins UK visit; to sign free trade deal on July 24

Highlights:

 
• India and UK to sign free trade agreement in London on July 24
 
• Tariff cuts on whisky, cars and textiles part of the deal
 
• Trade deal aims to double bilateral trade to £89 billion by 2030
 
• Social security pact finalised; investment treaty talks ongoing
 

INDIAN prime minister Narendra Modi embarked on a four-day visit to the United Kingdom and the Maldives on Wednesday, July 23. The visit to the UK is at the invitation of prime minister Keir Starmer, while the state visit to the Maldives is at the invitation of president Mohamed Muizzu, the India's Ministry of External Affairs said.

“Leaving for UK, a country with which our Comprehensive Strategic Partnership has achieved significant momentum in the last few years. I look forward to my talks with PM Keir Starmer and my meeting with His Majesty King Charles III,” Modi said in his departure statement on X.

The India-UK free trade agreement is set to be the key outcome of the visit to London. The deal will be formally signed on July 24 and will focus on expanding trade and defence ties.

Tariff cuts on whisky, cars, textiles

The trade agreement, concluded in May after three years of negotiations, includes tariff cuts on British whisky, cars, and selected food items. In return, Indian goods such as textiles and electric vehicles will receive duty-free access in the UK. The agreement will come into effect after ratification by the British Parliament and India’s federal cabinet, expected within a year.

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"This is a significant agreement," India’s foreign secretary Vikram Misri said on Tuesday, adding that legal vetting of the deal was nearly complete. Commerce and Industry Minister Piyush Goyal will accompany Modi for the signing ceremony.

According to Misri, bilateral trade between India and the UK reached £40.7 billion in 2023-24. The UK has become India’s sixth-largest investor with cumulative investments nearing £26.7 billion. About 1,000 Indian companies operate in the UK, employing 100,000 people and investing nearly £14.8 billion.

Under the terms of the agreement, tariffs on Scotch whisky will drop from 150 per cent to 75 per cent immediately, and fall further to 40 per cent over the next ten years, the British government said. On cars, India will cut duties from 100 per cent to 10 per cent under a quota system that will be gradually expanded.

India to gain access for EVs under quota system

Indian manufacturers are expected to gain access to the UK market for electric and hybrid vehicles under a similar quota system, officials from the commerce ministry said.

The ministry also said that 99 per cent of Indian exports to the UK, including garments and textiles, would benefit from zero duties. In return, the UK will see reductions on 90 per cent of its tariff lines.

ALSO READ: UK-India FTA hailed as historic milestone in ties

"The UK is an important market for Indian exporters," said Ajay Sahai, director general of the Federation of Indian Export Organisations. He said the agreement would boost sectors like textiles, footwear, marine and engineering products.

Cabinet clears FTA; Social security pact finalised

On Tuesday, sources said the Indian cabinet approved the free trade agreement, officially known as the comprehensive economic and trade agreement. The pact, which includes chapters on goods, services, innovation, government procurement and intellectual property rights, was finalised on May 6.

The trade deal is also aimed at eliminating duties on labour-intensive products such as leather, footwear and clothing. Imports of whisky and cars from Britain will become cheaper. The agreement targets doubling trade between the two countries to £89 billion by 2030.

Once signed, the agreement will need ratification from the British Parliament before it can take effect.

India and the UK have also concluded negotiations on a social security agreement called the Double Contribution Convention Agreement. It will help Indian professionals working in the UK avoid making double contributions to social security funds. Talks on a bilateral investment treaty (BIT) are still in progress.

Such agreements generally aim to remove or significantly reduce customs duties and ease norms to promote trade in services and bilateral investment.

India’s exports to the UK increased by 12.6 per cent to £10.7 billion in 2024-25, while imports rose by 2.3 per cent to £6.4 billion. Bilateral trade rose to £15.8 billion in 2023-24 from £15.1 billion in 2022-23.

(With inputs from agencies)