India-UK Free Trade Agreement Signed: Tariffs On Automobiles To Drop, $120 Billion Trade Target Set, More

A free trade agreement between India and the UK reached completion on Thursday, with Prime Minister Narendra Modi and UK Prime Minister Keir Starmer present for the ceremonial signing. The comprehensive trade pact, which received initial approval in May, was formally executed during Modi's official visit to Britain.

The landmark agreement establishes an ambitious target of expanding bilateral trade to $120 billion by 2030, thus, representing doubling of current trade volumes between the two nations.

Implementation Timeline, Approval

Commerce and Industry Minister Piyush Goyal and his British counterpart Jonathan Reynolds executed the formal signing ceremony. The agreement requires endorsement from the British Parliament before implementation, a process expected to take approximately one year, reports say.

Goyal posted from his official X handle: "Congratulations to Prime Minister 
@NarendraModi ji, UK Prime Minister @Keir_Starmer, and the people of India & the United Kingdom on the signing of the landmark India-UK Comprehensive Economic and Trade Agreement (CETA)."

Manufacturing And Industrial Benefits

The newly-signed agreement brings substantial tariff relief across multiple sectors. The following sectors stand to gain significantly from the tariff cuts, including:

Automotive industry: Duties reduced from up to 110 per cent down to 10 per cent within quota limits.

Aerospace industry: Tariffs slashed from 11 per cent to zero  per cent.

Electrical machinery: Tariffs decreased from 22 per cent to either zero or receiving 50 per cent reductions.

Meanwhile, MINI India has announced a price protection assurance programme for the MINI 3-Door Cooper S. One of its two models on sale in India will get a price protection due to the new Free Trade Agreement (FTA) signed between India and the UK.

Clean Energy Sector Expansion

The agreement opens new access to India's extensive procurement market for the UK's clean energy companies, in line with India's transition towards renewable energy and growing energy demands.

Technology Sector Investments

Eighteen firms have confirmed new investment plans, including the following:

Zerowatt Energy: The AI-powered energy intelligence platform is establishing its global headquarters in Leicester, committing £10 million investment and creating 50 new positions across Leicester, Manchester, Edinburgh, and London over three years.

DCube AI: The artificial intelligence (AI) and data services company is investing £5 million in the UK operations, generating 50 jobs across Manchester and London over the next three years to strengthen its technology offerings for British customers.

Aerospace Contracts Worth £5 Billion

Twenty-six British companies have secured new business opportunities in India. Notably, Airbus and Rolls-Royce will commence delivery of Airbus aircraft to major Indian airlines, with over half powered by Rolls-Royce engines, as part of contracts valued at approximately £5 billion. These agreements will support hundreds of jobs across facilities in Filton, Broughton, and Derby.

Financial Services Integration

British financial and professional services firms receive guaranteed market access in India's expanding economy. The agreement includes binding provisions for India's foreign investment limits in the insurance sector, ensuring UK companies receive equal treatment with domestic providers.

Consumer Goods And Luxury Items

The trade pact facilitates reduced import duties on various British products entering Indian markets. UK whisky and gin will see import duties halved from 150 per cent to 75 per cent initially, with further reductions to 40 per cent planned within ten years. Automobile tariffs will drop dramatically from over 100 per cent to 10 per cent, subject to quota arrangements. Indian consumers will benefit from lower costs on imported British goods including cosmetics, medical equipment, salmon, soft drinks, chocolate, and biscuits.

What's In For Labour-Intensive Sectors

The agreement creates enhanced export prospects for Indian industries that employ significant workforces, including textiles, marine products, leather goods, footwear, sports equipment, toys, gems and jewellery, engineering products, automotive components, and organic chemicals.

The trade deal ensures 99 per cent of Indian exports will receive duty-free access to British markets, while reducing tariffs on labour-intensive goods including leather, footwear, and clothing.

Current Trade Performance

Recent trade statistics demonstrate growing economic ties between the nations. India's exports to the UK increased 12.6 per cent to reach $14.5 billion, while imports grew 2.3 per cent to $8.6 billion in 2024-25.

Total trade volume between India and the UK expanded to $21.34 billion in 2023-24, showing improvement from $20.36 billion recorded in 2022-23.

Trade Agreement Structure

The India-UK FTA includes multiple trade dimensions, including goods, services, innovation, government procurement, and intellectual property rights. These bilateral arrangements involve eliminating or substantially reducing customs duties on most traded goods while simplifying regulations to encourage service trade and mutual investments.