The highly anticipated free trade agreement (FTA) between India and the United Kingdom officially came into effect on July 15, ushering in a new era of economic partnership. This landmark deal promises substantial benefits for consumers in India, who can now expect lower prices on a range of imported goods from the UK, including premium food items, alcoholic beverages, and automobiles.
What Gets Cheaper for Indian Consumers?
Under the new agreement, India has committed to reducing tariffs on various products imported from the UK. This includes a diverse array of items:
- Automobiles: Luxury and premium cars from the UK are expected to become more affordable.
- Alcoholic Beverages: Tariffs on spirits like brandy, bourbon, rum, gin, vodka, liqueurs, and tequila, as well as cider, mead, and sake, will see significant reductions. For instance, the tariff rate on these beverages will initially drop from 150% to 110% in the first year, gradually falling to 75% over a decade.
- Food Items: Consumers can look forward to lower prices on imported salmon, lamb, chocolates, soft drinks, and other specialty foods.
- Cosmetics: Certain cosmetic products from the UK will also benefit from reduced import duties.
These tariff cuts will be implemented progressively and are structured with sector-specific quotas to safeguard India's domestic industries from sudden market shifts.
Gains for Indian Exporters
While Indian consumers gain from cheaper imports, the Comprehensive Trade and Economic Agreement (CETA) with the UK offers even broader advantages for Indian exporters. The UK has eliminated duties on 99% of Indian goods from day one, compared to India's offer of zero tariffs on 64% of UK exports, gradually rising to 85%.
The agreement is particularly beneficial for several labor-intensive sectors in India:
- Apparel and Textiles: Indian clothing, which previously faced tariffs up to 12%, and textiles, around 8%, will largely enjoy zero-duty access to the UK market immediately.
- Footwear and Leather Products: These sectors, previously subject to duties as high as 16%, are set for substantial gains.
- Food Products: Exports like grapes, mangoes, and other fresh vegetables will also see improved market access.
- Other Beneficiaries: The deal extends advantages to carpets, seafood, chemicals, base metals, furniture, sports goods, gems and jewellery, auto components, and machinery.
Despite the UK importing goods worth $949 billion globally in FY26, India's share was only $25.12 billion. The commerce department has identified significant potential for growth, particularly for products that are top Indian exports but currently have limited presence in the UK market. This trade deal is poised to unlock that potential, fostering increased trade volumes and strengthening economic ties between the two nations.