Textiles to whisky: U.K.–India 'historic' deal is set to boost bilateral trade by over $34 billion a year

U.K. and India's bilateral trade is set to get a more than $34 billion annual boost over the long term following their free trade agreement, with the countries' leaders calling it a “historic” deal.

The FTA, which slashes duties on goods including textiles, alcohol and automobiles, was signed Thursday in the presence of Indian Prime Minister Narendra Modi and his UK counterpart, Keir Starmer.

Both sides had finalized the trade pact in May after three years of intense negotiations — marked by thorny issues such as visas, tariff reduction and tax breaks. Talks gained momentum and both governments accelerated to seal the deal as U.S. President Donald Trump's tariff threats sent the world in disarray.

The agreement between the world's fifth and sixth largest economies is expected to boost the bilateral trade by 25.5 billion pounds per year by 2040. U.K. and India trade in goods and services stood at over 40 billion pounds in 2024.

The deal offers “huge benefits to both of our countries,” boosting wages, raising living standards and bringing down prices for consumers, Starmer said.

India's Modi lauded the agreement as “a blueprint for our shared prosperity,” highlighting how Indian goods from textiles, jewelry, agricultural products and engineering goods would benefit from better access to the U.K. market.

As part of the deal, 92% of goods exported by U.K. to India will see tariffs either removed entirely or reduced, while as much as 99% of Indian goods shipped to Britain will be exempt from tariffs.

The U.K.–India trade pact marked a “strategic win” for New Delhi's trade diplomacy as it brings targeted benefits to Indian goods that previously faced high tariffs or regulatory barriers, said Dhiraj Nim, an economist at ANZ Bank.