India and the UK have agreed a trade deal aimed at boosting economic ties between the world’s fifth and sixth-largest economies.
The deal is a critical one for British Prime Minister Keir Starmer and his Indian counterpart Narendra Modi as countries globally race to insulate themselves from the fallout of US President Donald Trump’s tariff wars.
For India, the deal burnishes its credentials as an emerging destination among investors looking to diversify away from China. It represents London's most significant post-Brexit agreement and comes more than three years after negotiations started – and stalled – under a previous British government.
The deal aims to increase bilateral trade by a further £25.5 billion ($34 billion) a year by 2040, with liberal market access and eased trade restrictions, boosting sectors hardest hit by US tariffs.
It lowers tariffs on goods such as advanced manufacturing parts and food products such as lamb, salmon, chocolates and biscuits. It also agrees to quotas on both sides for car imports.
Trade between the two nations totalled £42.6 billion in 2024. India was Britain's 11th largest trading partner.
“These landmark agreements will further deepen our comprehensive strategic partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies,” Mr Modi said.
Mr Starmer said: “We are now in a new era for trade and the economy. That means going further and faster to strengthen the UK's economy.
“Strengthening our alliances and reducing trade barriers with economies around the world is part of our plan for change to deliver a stronger and more secure economy here at home.”
Mr Starmer will visit India “at the earliest opportunity”, Downing Street said.
Both countries are also seeking bilateral deals with the US to remove some of Mr Trump's tariffs that have upended the global trade system. The resulting turmoil sharpened focus in both London and New Delhi on the need to clinch a deal.
The agreement marks India opening up its long-guarded markets, including cars, setting an early example for the South Asian nation's likely approach to dealing with major Western powers such as the US and the EU. India is forecast to become the world’s third largest economy.
Talks over a free trade deal between India and Britain were initially launched in January 2022, and became a symbol of Britain's hopes for its independent trade policy after leaving the EU.
But negotiations were stop-start, with Britain having four different prime ministers since that launch date and elections in both countries last year.
Key sticking points had included visa rules for Indian students and professionals.
UK Business and Trade Secretary Jonathan Reynolds and India's Minister of Commerce and Industry Piyush Goyal held final talks in London last week after relaunching negotiations two months ago.
The deal means the UK will do significantly more business with the fast-growing economy of 1.4 billion people.
It is estimated to add £4.8 billion to gross domestic product, £2.2 billion to wages and an additional £25.5 billion to bilateral trade a year by 2040 the government said.
Mr Reynolds said: “By striking a new trade deal with the fastest-growing economy in the world, we are delivering billions for the UK economy and wages every year and unlocking growth in every corner of the country, from advanced manufacturing in the North East to whisky distilleries in Scotland.
“In times of global uncertainty, a pragmatic approach to global trade that provides businesses and consumers with stability is more important than ever.”
The UK government said the deal means tariff reductions on 90 per cent of exports that currently have levies, while 85 per cent will be fully tariff-free within a decade.
India has also agreed to reduce tariffs on medical devices, advanced machinery and lamb.
Based on 2022 trade, this amounts to India cutting tariffs worth over £400 million when the deal comes into force, which will more than double to around £900 million after 10 years.
On the other side, as part of the negotiations the UK has agreed to reduce tariffs on Indian imports, including textiles, apparel, and footwear, and some food products, such as frozen prawns.
This is expected to result in lower prices in shops for British consumers, said officials.
“The conclusion of a balanced, equitable and ambitious FTA, covering trade in goods and services, is expected to significantly enhance bilateral trade, generate new avenues for employment, raise living standards, and improve the overall well-being of citizens in both countries,” the Indian government said.
“It will also unlock new potential for the two nations to jointly develop products and services for global markets.”
