UK-India Trade Deal: The Concessions Britain Made to Get the Headline Numbers

When Keir Starmer and Indian Prime Minister Narendra Modi stood together in New Delhi last autumn to announce the broad terms of a UK-India Free Trade Agreement, the headline figures were striking: Scotch whisky tariffs cut from 150 per cent to 75 per cent on a phased basis; British-made cars facing duties reduced from 110 per cent; and Indian textiles entering the UK at reduced rates for the first time in decades.

Now that the legal text of the agreement has been published in full, trade lawyers and economists are working through the detail — and what they are finding is a more complicated picture than the political announcement suggested.

The Services Question

Perhaps the most significant omission in the final text is the limited progress on services liberalisation. The UK’s services sector — which accounts for roughly 80 per cent of GDP and represents Britain’s strongest comparative advantage in global trade — has secured only modest gains in India’s highly protected market.

Indian regulators have maintained restrictions on foreign ownership in financial services, legal services, and insurance that will not be affected by the deal. British law firms, for example, will not be permitted to establish branches in India under the agreement’s terms, a limitation that the Law Society of England and Wales described as “a significant missed opportunity.”

The whisky reduction itself is more modest than initially presented. The phased reduction from 150 per cent to 75 per cent will take place over ten years, meaning distillers will not see the full benefit until 2035. The Scotch Whisky Association welcomed the deal but noted that Indian producers had secured a parallel benefit: Indian spirits entering the UK will face lower duties from the deal’s inception date.

The Visa Arrangement

The most politically sensitive element of the agreement is the Social Security Convention, which grants Indian nationals working temporarily in the UK an exemption from paying National Insurance contributions for up to three years, with their Indian employer also exempt from paying employer’s NI. In return, British workers posted to India receive equivalent treatment under Indian social security law.

The arrangement has been seized upon by the Conservative opposition as evidence that the government has prioritised a trade headline at the expense of British workers’ tax contributions. Kemi Badenoch, who as Business Secretary in the previous government oversaw earlier rounds of the negotiations before they stalled, described the NI exemption as “unprecedented and potentially very large in its fiscal impact.”

The Treasury has so far declined to publish an estimate of how many Indian workers might benefit from the exemption, or what the net cost to the public finances might be. The Office for Budget Responsibility is understood to be seeking clarification from HMRC before it can model the fiscal effect.

What the UK Does Gain

Supporters of the deal, including the Confederation of British Industry and Make UK, the manufacturers’ organisation, argue that the critics are focusing on edge cases at the expense of the substantial gains. India’s tariff reductions on British-made goods cover over 90 per cent of UK export lines, and the automotive concessions include significant relaxations of Indian type-approval regulations that have previously acted as non-tariff barriers.

The pharmaceutical sector stands to gain substantially. Indian market-access restrictions on a range of British-licensed medicines have been eased, and the deal includes an intellectual property chapter that strengthens patent protections in ways that the Association of the British Pharmaceutical Industry says could be worth hundreds of millions of pounds to the sector annually.

For context, the Bank of England’s latest assessment projected that UK exports could receive a modest but durable boost from the agreement, estimating a net trade contribution of around 0.1 percentage points to GDP over five years — useful if not transformative.

The Political Legacy

The deal’s long-term significance may lie less in its immediate economic impact than in what it signals about Britain’s post-Brexit trade strategy. After years of relatively limited progress — deals with Australia and New Zealand were struck but remain modest in economic weight — the India agreement is the most substantial bilateral deal the UK has concluded since leaving the European Union.

Whether that justifies the compromises made on services and the NI question is a legitimate matter of political debate. The government’s bet is that access to a market of 1.4 billion people, growing at over six per cent a year, will prove its worth over the next decade regardless of the imperfections in the deal’s architecture.