The UK and India just signed a 'historic' free trade deal. Here's what to know

India and the UK have signed a free trade deal that is expected to vastly boost bilateral trade between the nations.

On 6 May, the countries – the world’s fifth and sixth largest economies – finally agreed on a deal that they have been working on since 2022. In a phone call following the deal, Britain's Prime Minister Sir Keir Starmer and India's Prime Minister Narendra Modi said the move would “further strengthen the UK-India strategic partnership”.

The UK government has described the pact as “the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU”, while Modi has called the agreement “historic”.

But what does the deal include, and what could it mean for the countries’ businesses, consumers and economies?

India has some of the world’s highest tariffs on imports. Under the deal, it will cut levies on 90% of British products sold in the country. Within a decade, 85% of British products sold will become tariff-free in India.

Some of the products affected include whisky, medical devices, electrical machinery, aerospace and foods including chocolate, salmon and lamb.

Tariffs on whisky and gin will be halved from 150% to 75%, falling to 40% by the 10^th year of the deal. This will benefit Scotch whisky makers, as their product will become cheaper in the world’s largest market for the drink.

India will also cut automotive tariffs from over 100% to 10%.

Based on data from 2022, India’s tariff cuts will amount to over $534 million, according to Reuters. This is expected to more than double after 10 years.

Britain has also agreed to cut its own tariffs, which were relatively lower than India's, on some products. This will mean 99% of India’s exports to Britain face no duties.

The removal of a tariff on textile imports will benefit India’s clothing industry, and the deal will also create export opportunities for sectors including toys, jewellery and auto parts.

The deal will also help British companies compete for more services contracts in India, although sectors such as legal services were not included.

The UK trade agreement with India is its third largest, after deals with Australia and Japan. In total, it has trade deals and agreements in principle with around 70 nations.

India was the UK’s 11th largest trading partner in 2024, accounting for 2.4% of total UK trade, and total trade in goods and services between India and Britain sat at nearly $57 billion in 2024.

The UK reported a total trade deficit of £8.4 billion with India at the end of 2024. The new agreement is expected to increase bilateral trade between the countries by $34 billion a year from 2040.

"The deal between India and the UK is particularly important in a global environment of rising trade tensions and highlights the critical role of partnerships for shared progress and prosperity," said Viraj Mehta, Head of Regional Agenda, India and South Asia at the World Economic Forum.

"India is a key growth engine for the world, and the World Economic Forum has been proud to act as a trusted partner to bring together key public, private and other stakeholders for a range of impactful and diverse initiatives that support India's vision and priorities."

Although the deal won’t come into force for up to a year, it is reported that over time, it would boost the UK economy by $6.4 billion – a small proportion of its total $3,804 billion in 2024.

India is the world’s fastest-growing major economy, however, and has a population of more than 1.4 billion people. With a growing middle class, its demand for imports is expected to grow significantly over the next 10 years, according to the UK government. This represents a big potential customer base for UK businesses and could create more jobs.

The UK says that lowering tariffs on items such as clothes and jewellery could lead to cheaper prices and increased choice. In India, consumers could also see more choice among the goods included in the deal.

"India and the UK represent a burgeoning wealth of ideas, talents and resources," said Bharti Enterprises Founder & Chairman, Sunil Bharti Mittal, in a statement. "This is not only a pivotal milestone in the history of the relations between our two great nations, but one that promises to be the gateway to an era of flourishing bilateral cooperation, shared innovation and enhanced people-to-people connects.”

Neeraj Kanwar, Vice Chairman and Managing Director at Apollo Tyres, said the agreement represents 'a new chapter' between the two nations. "This partnership not only enhances trade and innovation but also nurtures deeper cultural and economic ties, opening doors to shared growth and a more sustainable future for both countries."

According to the UK government, the UK and India will jointly work to finalize the legal text of the agreement. Then, both countries will begin their processes to ratify the deal. Once this is complete, the treaty will come into force.

Talks on a bilateral investment treaty, meanwhile, which would promote and protect investments made by investors from the countries in each other's territory, are still ongoing.