India and the United Kingdom are set to sign a landmark free trade agreement on Thursday during Prime Minister Narendra Modi’s visit to London - his fourth since taking office in 2014.
This agreement marks the culmination of over three years of on-and-off negotiations, finally concluded in May.
It comes amid a shifting global trade landscape following earlier tariff disruptions sparked by U.S. President Donald Trump.
The deal, hailed as a major breakthrough for both economies, will slash tariffs on a range of goods including textiles, whisky, and automobiles, and provide broader market access for businesses on both sides.
The agreement is projected to increase bilateral trade by £25.5 billion ($34 billion) by the year 2040.
It will come into force once it receives approval from the British Parliament and India's federal cabinet, likely within the next year.
Calling the deal a “major win,” British Prime Minister Keir Starmer said: “Our landmark trade deal with India is a major win for Britain. It will create thousands of British jobs across the UK, unlock new opportunities for businesses, and drive growth.”
As part of the agreement, India will reduce tariffs on Scotch whisky from 150% to 75% immediately, with further reductions to 40% over the next ten years.
For British carmakers, India will cut duties from over 100% to 10%, under a phased quota system. In exchange, Indian producers will gain access to the UK market for electric and hybrid vehicles, also under quotas, according to Indian commerce ministry officials.
The Indian government has stated that 99% of its exports to the UK - such as textiles - will benefit from zero tariffs. Meanwhile, the UK will see tariff reductions on 90% of its product lines.
The pact is considered the most significant trade deal the UK has secured since Brexit, though its estimated contribution of £4.8 billion to the British economy by 2040 remains modest relative to the country’s £2.6 trillion GDP in 2024.
Besides trade, Modi and Starmer will sign a broader strategic partnership agreement covering defence, climate action, and crime prevention.
The deal also paves the way for smoother movement of temporary business visitors between the two countries, though it does not include provisions on visa policies. Additionally, the UK and India have agreed to eliminate dual social security contributions for workers on temporary assignments in either country.
British firms will now gain access to India's public procurement market in areas like clean energy. The agreement also includes provisions for services sectors such as insurance.
However, India was unsuccessful in securing an exemption from the UK’s upcoming Carbon Border Adjustment Mechanism (CBAM), which is expected to impose additional levies on carbon-intensive imports starting in 2027.
Talks for a separate bilateral investment treaty, which were held in parallel, are ongoing and have not yet concluded.