Three years after discussions commenced, India and the United Kingdom successfully concluded a landmark Free Trade Agreement (FTA) on Monday. It has been hailed as the most comprehensive bilateral trade deal signed by the UK since its exit from the European Union. This pact is expected to dramatically reshape trade relations between the two nations and deliver wide-ranging benefits across sectors.Major economic impact & trade growthThe FTA is projected to increase bilateral trade between the fifth and sixth largest global economies by £25.5 billion annually by 2040. In 2024, total trade between the two countries reached £42.6 billion, with India ranked as the UK’s 11th largest trading partner. British officials have described the deal as the “largest and most economically significant” since Brexit.This agreement also comes with a Double Contribution Convention, designed to enhance financial cooperation and simplify taxation processes between businesses operating in both countries.Tariff reductions across key sectorsA central feature of the agreement is substantial tariff reductions on British exports to India. Tariffs on Scotch whisky and gin — currently at 150% — will be gradually reduced to 40% over a decade, offering a major boost to UK distillers and significantly lowering consumer prices in India, the world’s largest whisky market.India will also lower its notoriously high import duties on a wide range of British goods. Key changes include:Automobiles: Tariffs cut to 10% under a quota, down from over 100%.Medical Devices, Cosmetics, and Aerospace Equipment: Significantly reduced levies to support healthcare and tech sectors.Agricultural Goods: Lowered duties on lamb, salmon, chocolate, and biscuits.The cumulative tariff cuts, based on 2022 figures, represent over £400 million in savings annually, a figure expected to more than double within 10 years.Moreover, the India–UK deal is more than just a reduction in customs duties. It covers a broad range of economic areas, including:Trade in goods and servicesInvestment facilitationIntellectual property protectionGovernment procurementRegulatory cooperationIndia’s FTA NetworkWith this agreement, India has now signed 16 FTAs, part of a broader effort to strengthen its global trade footprint. Since 2014, India has inked pacts with countries including the UAE, Australia, Mauritius, and the four-nation European bloc EFTA. These deals give India preferential access to markets in over 90 countries.Understanding FTAsA Free Trade Agreement is a comprehensive pact between two or more countries to reduce or eliminate tariffs, ease trade barriers, and promote investment and services. These agreements may vary in structure, with some focused solely on goods (FTAs/PTAs) and others encompassing broader cooperation (such as CEPAs and CECAs).The benefits include:Preferential market accessAttraction of foreign investmentCompetitive edge over non-FTA nationsLower input costs for domestic industriesEnhanced consumer choice and reduced pricesWhile an FTA may promise zero basic customs duty, other taxes like IGST and welfare cess may still apply. Also, each FTA includes a “sensitive list” of excluded products—often items like dairy, certain vegetables, and select auto products—where no tariff relief is granted.‘A historic milestone’Prime Minister Narendra Modi called the agreement a historic milestone and a catalyst for deepening the India–UK strategic partnership. “This FTA will accelerate trade, drive innovation, and generate jobs,” he stated, adding that he looks forward to welcoming UK Prime Minister Keir Starmer to India soon.“Delighted to speak with my friend PM @Keir_Starmer. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention,” (With agency inputs)