India-UK FTA: Economy will get a boost with exports, mobility of Indian workers will increase
India-UK FTA: Under the new deal, Indian workers posted in the UK will get the benefit of exemption on National Insurance contributions for up to three years, allowing them to save more and potentially send more money back home. The FTA promises to double the trade of goods and services between India and the UK by 2030.
The recently finalized free trade agreement (FTA) between India and the UK will not only strengthen Indian exports but also support India's economy through increased remittances and domestic spending. According to a report by S&P Global Market Intelligence, the mobility of Indian workers in both countries will also grow.
In 2024, Indian expatriates working abroad sent approximately $130 billion to India, representing 3.3 percent of the country's gross domestic product (GDP). The UK remains the third largest source of these remittances, after the US and the United Arab Emirates. Under the new deal, Indian workers posted in the UK will benefit from a waiver on National Insurance contributions for up to three years, enabling them to save more and potentially send more money home.
The FTA aims to double trade in goods and services between India and the UK by 2030, up from $56.7 billion in 2024. Indian apparel, which faces challenges in the US market, is expected to benefit from improved access to the UK market. For the UK, the agreement provides increased access to India's rapidly growing middle class. However, immediate trade benefits will be most visible in the drinks sector, where tariffs on 97 percent of whisky and gin exports will be reduced by half.
Since the deal does not cover pharmaceutical exports, some of the economic advantages for the UK are limited. There is also uncertainty about how UK car exports to India will operate under the new quota system. The agreement is part of India's broader strategy to establish trade agreements with major global partners.
These initiatives aim to strengthen India's global trade network amidst shifting international trade policies. The quick signing of the India-UK agreement marks an important step for the UK, helping the country reshape its trade relations after Brexit and reduce supply chain disruptions. Overall, the trade deal is expected to bolster economic ties between India and the UK and improve India's standing in global trade.
