Why in the News?

India and the United Kingdom signed a Free Trade Agreement (FTA), ending nearly 3 years of negotiations, with an aim to boost trade and investment between the two nations.

What is Free Trade Agreement (FTA)?

• An FTA is an agreement between two or more countries to reduce or eliminate customs tariffs and non-tariff barriers on trade between them.
• Objective: To promote trade by making it easier and more cost-effective for businesses to import and export goods and services.
• FTAs can cover goods, services, investment, and intellectual property rights.
• By reducing trade barriers, FTAs also benefit consumers by offering a wider range of products at lower prices.
• FTAs play a key role in boosting economic growth and job creation by facilitating trade between countries.
• India’s FTAs:
  • India has signed FTAs with 16 countries or regional blocs as of May 2025. 
  • These FTAs cover major partners such as Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, South Korea, Japan, Australia, UAE, Mauritius, ASEAN (10 countries), and EFTA (4 countries).

Key terms of the UK-India FTA:

• Trade Growth: Expected to boost bilateral trade by £25.5 billion annually by 2040.
• Whisky and Gin Tariffs: Tariffs reduced from 150% to 75%, eventually to 40% over 10 years.
• Automobile Tariffs: India to reduce automotive tariffs from over 100% to 10%.
• Other Goods: Tariffs reduced on cosmetics, aerospace, medical devices, chocolate, and more.
• Services and Work Permits: Increased quotas for Indian workers in IT and healthcare, with 100 new visas annually for professionals.
• Carbon Tax: Dispute over UK’s proposed carbon tax on metal imports.
• Supply Chain Resilience: FTA aims to reduce reliance on China and improve supply chain security.

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