London: India and the UK Thursday inked a landmark free trade agreement that seeks to boost both economies, slash tariff lines across 99 per cent of Indian exports, unlock thousands of jobs and cut tariffs on British whisky, cars and an array of other items.
The pact, officially named as the Comprehensive Economic and Trade Agreement (CETA), was signed by Commerce Minister Piyush Goyal and British Trade Secretary Jonathan Reynolds in the presence of the prime ministers of India and the UK.
The mega deal was formalised shortly after British PM Keir Starmer hosted his Indian counterpart Narendra Modi at Chequers, the countryside residence of the British PM that is located 50km northwest of London.
The CETA, firmed up after three years of negotiations, is expected to ensure comprehensive market access for Indian goods across all sectors and India will gain from tariff elimination on about 99 per cent of tariff lines (product categories) covering almost 100 per cent of the trade values, officials said.
“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,” said Starmer, as he greeted the Indian prime minister.
In his remarks to the media, Modi said the UK and India are “natural partners” and said the nations were “writing a new chapter” in their history.
He highlighted Indian textiles, footwear, gems and jewellery, seafood and engineering goods will get better market access in the UK, with agricultural products and processed food industry winning new opportunities for growth following the trade deal.
“This agreement will prove especially beneficial for India’s youth, farmers, fishermen and MSME sector. On the other hand, people and industries in India will be able to access products made in the UK such as medical devices and aerospace parts at affordable and attractive prices,” Modi said.
“Along with this agreement, we have also reached a consensus on the Double Contributions Convention (DCC). This will inject new energy into the services sectors of both countries, especially in technology and finance.”
“It will promote ease of doing business, reduce cost of doing business and increase the confidence of doing business,” he said.
The prime minister went on to use cricket as a metaphor for the UK-India relationship, saying there may be a “swing and a miss” at times, but they are committed to playing with a “straight bat” and building a “high-scoring, solid partnership”.
The trade pact was inked at the Great Hall of Chequers.
Hours before the trade pact was inked, Starmer said it will create thousands of British jobs across the UK, unlock new opportunities for businesses and drive growth.
According to the UK Department for Business and Trade (DBT), once the trade pact comes into force, India’s average tariff on British products will drop from 15 per cent to 3 per cent. It will mean British companies selling products to India, from soft drinks and cosmetics to cars and medical devices, will find it easier to sell to the Indian market.
Whisky producers will benefit from tariffs slashed in half, reduced immediately from 150 per cent to 75 per cent and then dropped even further to 40 per cent over the next 10 years, giving the UK an advantage over international competitors in reaching the Indian market, DBT said.
India will see an elimination of tariffs on around half its exports to the UK, including textiles, footwear and agricultural produce such as mangoes and grapes. DBT officials indicated that UK tariffs were typically already at the lower end but these further reductions will make India a more competitive market in the region.
Official statistics show that the UK already imports 11 billion pounds in goods from India, with liberalised tariffs set to make it easier and cheaper to acquire products.
For businesses, this could mean potential savings when importing components and materials used in areas such as advanced manufacturing or luxury and consumer goods.
New analysis published along with the CETA claims every region of the United Kingdom will benefit from an estimated 4.8 billion pounds increase to UK GDP each year in the long term.
Sectors in the spotlight include manufacturing, set to benefit from tariff cuts on aerospace (11 per cent reduced to 0), automotives (110 per cent down to 10 per cent under a quota) and electrical machinery (down from 22 per cent down).
Tariffs cuts combined with a reduction in regulatory barriers to bilateral trade are estimated to increase UK exports to India by nearly 60 per cent by 2040 — equivalent to an additional 15.7 billion pounds of UK exports to India when applied to projections of future trade in 2040, the DBT said.
The official UK figures forecast an increase in bilateral trade by nearly 39 per cent in the long run, equivalent to 25.5 billion pounds a year, when compared to 2040 projected levels of trade in the absence of an agreement.
The clean energy industry will have “brand new, unprecedented access” to India’s vast procurement market as the country makes the switch to renewable energy and continues to see growing energy demand.
“For financial and professional business services, locked-in access will offer certainty to expand in India’s growing market and measures such as binding India’s foreign investment cap for the insurance sector, ensuring UK financial services companies are treated on an equal footing with domestic suppliers,” the DBT said.
PTI
