Britain and India establish a free trade agreement during Modi's visit.
Modi's Visit Leads to New Economic Opportunities and Strategic Partnerships
Explore the new free trade deal between Britain and India, which cuts tariffs on goods like whisky and automobiles, and boosts bilateral trade and market access.
LONDON/NEW DELHI, July 24, 2025
Britain and India finalised a free trade agreement during Indian Prime Minister Narendra Modi's visit. The deal will reduce tariffs on goods such as textiles, whiskey, and automobiles, providing greater market access and new export opportunities for businesses in both countries. The agreement, reached after three years of negotiations, addresses tariff disruptions and aims to create a more stable trade environment.
The agreement aims to boost trade by £25.5 billion ($34 billion) by 2040, making it Britain's largest post-Brexit deal, with benefits including lower costs for British importers and exporters. For India, it strengthens ties with an advanced economy, offering a stronger platform for future deals, especially with the EU, while opening British markets to a broader range of Indian goods.
Both parties celebrated the deal as historic, which will take effect after a ratification process expected to last about a year. Following this, companies such as whiskey producer Diageo and car manufacturers like BMW, Nissan, Aston Martin, and Tata-owned Jaguar Land Rover could benefit from reduced tariffs.
During his visit, Prime Minister Keir Starmer said the agreement would make trade cheaper, faster, and easier for British and Indian businesses. Modi described it as a path to shared prosperity, emphasising expanded market access for Indian products and cooperation in the defence and climate sectors. The deal is set to provide tangible benefits for businesses in both nations.
Modi spent almost three hours with Starmer before meeting King Charles at the Sandringham Estate. The trade agreement progressed rapidly after the new Labour government in Britain resumed negotiations in February. "We managed to acknowledge and respect each other's concerns, ensuring that contentious matters did not hinder the success of the talks," stated India's Commerce Minister Piyush Goyal in an interview with the media.
WHISKY AND AUTOMOBILES
As part of the trade agreement, tariffs on Scotch whisky will decrease immediately from 150% to 75%, and will gradually reduce to 40% over the next ten years. Additionally, tariffs on spirits, such as brandy and rum, will initially be lowered to 110% and will subsequently decrease to 75%.
Regarding automobiles, India plans to reduce duties to 10% within five years from the current rates that can reach up to 110%, implemented through a gradually liberalised quota system.
In exchange, Indian manufacturers will receive access to the British market for electric and hybrid vehicles, also through a quota system.
According to the agreement, 99% of Indian exports to Britain will enjoy zero duties, including textiles. In comparison, Britain will experience tariff reductions on 90% of its tariff lines, resulting in an average tariff for UK firms dropping from 15% to 3%.
However, the anticipated increase in British economic output of £4.8 billion annually by 2040 is relatively modest when compared to Britain's GDP of £2.6 trillion expected in 2024.
The Labour government in Britain, which has been in power for a year, has embarked on revitalising relations with the EU to alleviate post-Brexit trade challenges and has achieved some tariff concessions from the United States.
"In a time of increasing protectionism, today's announcement conveys a strong message," remarked Rain Newton-Smith, CEO of the Confederation of British Industry.
The agreement will facilitate simpler access for temporary business visitors, although visa provisions are not included in the agreement. Both parties also agreed that workers on temporary assignments in the other country will no longer need to pay social security contributions in both India and Britain.
British companies will gain access to India’s procurement market for projects in areas such as clean energy, and the trade deal will also pertain to service sectors like insurance.
India, however, was unable to obtain an exemption from Britain's Carbon Border Adjustment Mechanism, which may impose higher taxes on polluters starting in 2027, as part of the agreement.
Goyal stated that there were still "a few pending issues" that had delayed the signing of the bilateral investment treaty. Still, he asserted that the trade deal indicated India's commitment to negotiations with both the European Union and the United States.
"No agreement necessarily serves as a foundation for another; however, this does illustrate India's serious intentions in engaging with the developed world," he commented.
Britain-India Free Trade Agreement
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