A historic Free Trade Agreement (FTA) will be signed between India and the United Kingdom (UK) during Prime Minister Narendra Modi’s visit to Britain. This agreement is being done after nearly three years of negotiations. This is India’s first major trade agreement with a developed country in the last 10 years.
This agreement can come into force within a year after approval from the Parliament and Cabinets of both the countries.
What will India and UK get?
Concessions from India:
Alcohol (Scotch Whisky and Gin): The import duty on these will be reduced from 150% to 75% first and it will be brought down to 40% in the next 10 years.
Vehicles: More than 100% tariff on vehicles made in the UK will be reduced to 10%, under a quota system.
Other products: Duty will also be reduced on cosmetics, chocolates, biscuits, salmon fish and medical devices coming from Britain.
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Concessions from UK:
Exemption to Indian products: 99% of Indian goods will get duty-free access to the UK, that is, almost all existing Indian exports will not be taxed.
Which sectors of India will benefit?
Industries like textiles, shoes, auto parts, jewelry, furniture, sports goods, chemicals and machinery will get a big benefit from this agreement. Many of these products are currently taxed from 4% to 16% in the UK, which will now be reduced.
Indian manufacturers of electric and hybrid vehicles will also get priority in the UK market.
These companies will benefit:
Clothes: Welspun India, Arvind Limited
Shoes: Bata India, Relaxo
Cars and EVs: Tata Motors, Mahindra Electric
Engineering: Bharat Forge
. What will be the benefit to the UK…?
According to the UK government’s estimate, this agreement can increase the UK’s GDP by £4.8 billion (about ₹56,150 crores) every year.
British customers will now be able to buy Indian clothes, shoes and food products at cheaper prices. India will cut taxes on about 90% of the products coming from the UK.
UK companies like Diageo (alcohol manufacturer) and Aston Martin, Jaguar Land Rover (JLR – which is a Tata Motors company) will get a big benefit in India’s fast growing market.
Service sector and professionals will also benefit
Relief for Indian professionals: Professionals sent from India to the UK will not have to pay social security tax for 3 years. This will save ₹4,000 crores every year.
Contract services: Indian professionals like yoga teachers, chefs, musicians will get the opportunity to work temporarily in the UK.
Government tenders: UK companies will now be able to bid for government tenders above ₹2 billion in India, giving them access to a market of about ₹4.09 lakh crore.
Investment and trade relations will be strengthened
Indian companies in the UK: Currently there are more than 1,000 Indian companies in the UK, which employ more than 1 lakh people and have invested $20 billion (₹1.73 lakh crore).
UK investment in India: The UK has so far invested about $36 billion (₹3.11 lakh crore) in India, making it the sixth largest foreign investor in India.
.Conclusion
The India-UK FTA can prove to be a game-changer for both countries. It will not only increase trade and investment, but people will also get everyday goods at cheaper prices and professionals will get new international opportunities.