India-UK Free Trade Agreement Reduces Tariffs and Boosts Business Confidence Amid Global Volatility

The India-UK Free Trade Agreement (FTA), signed by Prime Ministers Narendra Modi and Keir Starmer on July 24, aims to significantly reduce trade tariffs from 15% to 3%. This agreement is expected to enhance business confidence amid global instability, as discussed in the British Parliament. UK Business and Trade Secretary Jonathan Reynolds updated MPs on the pre-ratification process required before the trade deal's implementation.

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The India-UK Comprehensive Economic and Trade Agreement (CETA) requires ratification under the UK's Constitutional Reform and Governance Act 2010 (CRaG) for its legislative implementation. Reynolds highlighted that this agreement will lower average Indian tariffs on UK goods from 15% to 3%, reducing tariff duties by approximately £400 million initially, increasing to £900 million after full implementation.

Economic Impact and Opportunities

The FTA is projected to boost bilateral trade by £25.5 billion, increase UK GDP by £4.8 billion, and raise wages by £2.2 billion annually. "We are showing the world that we stand for free, fair, and open trade," Reynolds stated. He emphasised that in a volatile world, this deal provides businesses with the confidence to grow and expand.

Reynolds, who negotiated the deal with Commerce Minister Piyush Goyal, noted that the India-UK CETA offers unprecedented preferential access to India's federal procurement market. It ensures guaranteed market access for UK service suppliers and simplifies trade through improved customs and digital processes.

Regional Benefits and Strategic Alignment

This agreement is expected to unlock new business opportunities across the UK, including a projected £190 million boost for the West Midlands and Scotland, and £210 million for North West England. The deal aligns with the UK's Industrial Strategy, supporting high-growth sectors. As India's economy expands, so will opportunities for UK businesses, providing a competitive edge within the G20's fastest-growing economy.

The Cabinet minister also informed Parliament about commissioning the Trade and Agriculture Commission (TAC), Food Standards Agency (FSA), and Food Standards Scotland (FSS) to provide independent advice for the government's report under Section 42 of the Agriculture Act 2020. These reports must be presented to Parliament before starting CRaG processes to ratify the trade agreement.

Implementation Procedures

All necessary legislation for implementing the agreement will follow standard procedures. Concurrently, negotiations for the Double Contribution Convention (DCC) will be finalised, which will also undergo CRaG processes. The DCC was agreed alongside the FTA to prevent temporary foreign workers from duplicating social security contributions in both countries.

The India-UK CETA aims to double bilateral trade to USD 120 billion by 2030. While India requires only a Cabinet nod for approval, the UK involves a parliamentary ratification process expected to take up to a year. In the House of Lords, Department for Business and Trade junior minister Baroness Maggie Jones updated peers on FTA progress.

With inputs from PTI