Key Points

Ahead of PM Modi's visit, the Union Cabinet approved the FTA on Tuesday. The deal, called the Comprehensive Economic and Trade Agreement (CEPA), is set to be signed on Thursday in presence of PM Modi and British Prime Minister Keir Starmer.

Commerce and Industry Minister Piyush Goyal will also be in London for the crucial trade deal. India and UK had announced the conclusion of agreement on May 6 and the full text of the deal was held back pending final legal review.

The idea behind the trade deal is to eliminate or reduce tariffs on imports and exports between the two nations. This should make Indian products competitive in the UK and vice versa. Both nations desire to increase their trade to USD 120 billion by 2030.

As announced earlier, India is set to benefit from the elimination or reduction of tariffs on about 99 per cent of its exports to the UK post the FTA.

The FTA is expected to boost key sectors such as textiles, leather, footwear, sports goods and toys, marine products, gems and jewellery, engineering goods, auto parts and engines, and organic chemicals.

"The FTA ensures comprehensive market access for goods, across all sectors, covering all of India's export interests. India will gain from tariff elimination on about 99% of the tariff lines covering almost 100% of the trade value offering huge opportunities for increase in the bilateral trade between India and the UK," Commerce and Industry Ministry had said in its release on May 6. .

India, in turn, will reduce tariffs on 90 per cent of its imports from UK (tariff lines) in phases, with 64 per cent seeing an immediate cut.

The British food and drinks sector will be among the immediate beneficiaries of the trade deal. Nearly 90 per cent of UK exports in this category are Scotch whisky, which currently faces a 150 per cent tariff. Under the new agreement, tariffs on whisky and gin will initially drop to 75 per cent, and further to 40 per cent over a period of ten years.

The agreement also includes commitments on services, covering IT/ITeS, financial and professional services (including architecture and engineering), as well as educational services.

It will simplify mobility for Indian professionals and provide a three-year exemption from social security contributions in the UK for temporary Indian workers and their employers. Social security contributions post FTA will be paid in India, rather than in both places.

Automotive tariffs is set to be cut from over 100 per cent to 10 per cent under a tariff rate quota system. This could pose a significant challenge to the Indian automobile sector and run counter to the 'Make in India' initiative.

The UK government announced on May 6, 2025 that the country had concluded a free trade agreement (FTA) with India describing it as a "huge economic win for the UK" and a "landmark trade deal". It emphasised the potential of the Indian market with its economy expected to be the third largest in the world by 2028.

Some issues like details of auto quotas and carbon border taxes are still to be revealed. Politico earlier reported that the latter is being dealt with outside the trade deal in separate, ongoing negotiations. In addition, negotiations on a Bilateral Investment Treaty (BIT) are ongoing.

In his departure statement, PM Modi said that India and UK share a Comprehensive Strategic Partnership that has witnessed significant progress in recent years.

"Our collaboration spans a wide range of sectors, including trade, investment, technology, innovation, defence, education, research, sustainability, health and people-to-people ties," he said.

PM Modi said that during his meeting with the UK Prime Minister, they will have the opportunity to further enhance our economic partnership, aimed at fostering prosperity, growth and jobs creation in both countries.

After UK, PM Modi will also visit Maldives in the second leg of his two-nation tour.

- ANI