Keir Starmer and his Indian counterpart Narendra Modi have signed a trade deal worth an estimated £6bn, with the UK Prime Minister hailing the landmark agreement a “historic day” for Britain and India.
The trade pact – the result of over three years of negotiations – will see tariffs on the whisky and cars that British firms export to India drastically reduced in return for Britain opening up elements labour market to Indian workers.
The bilateral deal is understood to be one of the most valuable of its kind to the UK economy, and will bring the average tariff on Indian imports from Britain from 15 per cent to three per cent. It is hoped the deal will eventually provide an annual boost of £25.5bn in bilateral trade between the two countries.
Some 90 per cent of all tariffs on UK-made goods sent to India will come down as a result of the deal, which was first announced in May, while 85 per cent of tariff lines will have no trade levies whatsoever in 10 years’ time.
Import taxes on whisky and gin made in the UK will be halved to 75 per cent immediately, before being brought down to 40 per cent in the next decade. Similarly, tariffs on exports from British carmakers will be brought down as low as 10 per cent from 110 per cent over the same period, though, like the UK’s recent trade deal with the US, there will be quotas put in place capping the number of cars which receive the lower tariff.
The dawn of a new ‘golden era’?
Speaking at a press conference at Chequers, the Prime Minister’s grace-and-favour country house, Starmer hailed the deal as having the potential to bring “huge benefits to both of our countries”.
“I’m really pleased and privileged to welcome you here today on what I consider to be a historic day for both of our countries, and the delivery of the commitment that we made to each other,” he said, adding: “The UK-India deal is now signed, sealed and ready to be delivered.”
But Labour’s political opponents have warned that an agreement to remove employer national insurance on Indian staff in the UK – and vice versa – risks undercutting British workers and undermining any economic benefits.
Under the deal, British firms would not need to pay any payroll tax on Indian workers who come to the UK on an intra-company transfer, sparking fears that exchanges of workers from India would be preferred to hiring UK staff, given April’s hike to UK national insurance.
The deal has also drawn criticism over the lack of any progress on the UK’s world-leading financial and professional services sectors, though both countries agreed to continue attempts to lower economic barriers to the City’s ties with the rapidly growing Indian economy.
Standing alongside Starmer, Modi said: “This isn’t merely paving the way for economic partnership but is also a blueprint for our shared prosperity.”
Amarjit Singh, Founder and CEO of the India Business Group, said the deal heralded “the dawn of a new golden era in the relationship between these two vibrant nations”.
“In today’s increasingly interconnected yet complex global landscape, this partnership transcends traditional notions of trade; it embodies a collaborative effort to shape a sustainable and prosperous future together,” he added.
“The responsibility now lies with the business community to seize these opportunities and bring the framework to life through concrete actions.”