The most significant development of the month is the UK-India trade deal, finalised on 6th May 2025. Coined the “best deal that any country has agreed with India”[1] by the UK Government, the deal aims to ease the process of buying and selling goods and services between the UK and India. We reflect on the strategy behind the “landmark”[2] trade deal, the reached agreements and what the future relationship may look like between two of the largest economies in the world.
Why?
Given the size and geographical limits of the UK, it is not surprising that it relies heavily on trade, or that its Government consider it key to sustained economic growth. As part of the Government’s Plan for Change, its focus has been on securing opportunity and access to a diversified export and import market for UK businesses, in order to boost trade and support production in the UK.
India’s progression over the last decade is undeniable and its position, in the competitive trade market, has intensified. It is set to be the third largest economy in the world by 2028[3] and, given the strong rooted history between the two nations, India represents a significant growth opportunity for the UK.
Ultimately, the deal is aimed at continuing this strong relationship, by facilitating and accelerating trade and providing the UK with an opportunity to keep up with India's dynamic and rapidly growing economy.
What?
The deal has lowered, and in some cases completely cut, taxes on goods imported from the UK to India. Amongst these goods are; clothing, scotch whisky, gin, certain cars (including high value cars), jewellery and cosmetics. In total, tariffs will be reduced by 90%, with 85% of these becoming completely tax free within the decade.
Not only has the deal secured reduced tariffs, which will continue to decrease as the years progress, India has also promised to renegotiate the deal if India were to offer better terms to another country. This demonstrates both nation's commitments to one another and recognition of the importance of this longstanding and mutually beneficial relationship. In the wake of increasingly high tariffs imposed by other countries, the significantly reduced tariffs in this deal will be welcomed by manufacturers, businesses and consumers and ignite a new era of successful trade and business.
Further, as part of facilitating trade, the UK has agreed to ease the mobility of Indian workers who want to work or study in the UK. There will now be a three-year exemption on the social security that Indian employees have to pay when working in the UK, making Indian workers attractive to UK businesses, when working on short-term visas.
Future?
The trade deal is not set to come into full force for another year and so no immediate change will be apparent. However, projections include:
- Cheaper prices and greater choice for consumers (in both countries);
- significant boosts in the gin, whisky and car industries;
- UK manufacturers becoming the first port of call for trade and increasing business;
- Rise in employment and opportunities;
- Increased investment; and
- Additional commercial flexibility and mobilisation.
Ultimately, the deal demonstrates the growing need for other world leading economies to recognise the rapid widening of opportunity and potential for successful investments in India, in order to remain competitive in international trade.
DWF is a leading legal adviser to Indian and India-focused companies, financial institutions, and high-net-worth individuals and families. Our India Group, consisting of 104 lawyers from 9 countries, 16 practice areas, and 9 sector groups, is the largest India group of any international law firm located outside India.
Dhruv Chhatralia BEM, the Head of the DWF India Group, was named to the India Business Law Journal’s International A-List 2024 featuring the world’s top-tier international lawyers outside India, based on recommendations by general counsels and lawyers at Indian law firms, for his work on cross-border aspects of India-related matters. DWF was also shortlisted for the award of “Legal Practice of the Year” at the 6th Annual UK-India Awards in 2024 based on the achievements of the DWF India Group. Further details about the DWF India Group can be found on the following webpage: DWF India Group
[1] UK-India trade deal: conclusion summary - GOV.UK
[2] UK and India strike landmark trade deal
[3] IMF World Economic Outlook, October 2024
