A significant free trade agreement between India and the UK has been finalized. 99% of Indian exports are guaranteed duty-free access to UK markets under the agreement. 90% of tariff lines will see import duties reduced by India, which will assist consumers by lowering the cost of a variety of commodities.
A historic multi-billion-pound free trade agreement between the UK and India was finalized on Tuesday, guaranteeing tariff reductions across 90% of the lines. By 2040, it is expected that the agreement will benefit India greatly and add 4.8 billion pounds ($6.4 billion) annually to Britain's GDP.
The Free Trade Agreement (FTA) will be formalized through legal text after Prime Ministers Narendra Modi and Keir Starmer confirmed it over the phone. The British Parliament will then need to approve it for execution.
What is a Free Trade Agreement?
A bilateral or multilateral agreement wherein the member countries agree to remove or reduce customs tariffs on the majority of traded commodities is known as a free trade agreement. In order to improve services trade and cross-border investments, these agreements help streamline procedures and lower non-tariff barriers on significant imports from partner nations.
Free trade agreements provide the member countries with a number of strategic advantages. They make it possible to enter partner country marketplaces duty-free, which increases export destination diversification and growth.
Domestic exporters benefit from a level playing field by obtaining preferential treatment over competitors who are not FTA members, particularly in light of other countries having previously put comparable accords in place.
Additionally, free trade agreements (FTAs) attract international investment, which boosts domestic manufacturing. They also make it easier to obtain capital goods, intermediate products, and necessary raw materials—all of which are necessary for the creation of value-added items. In the end, these agreements improve consumer welfare and long-term economic efficiency.
The majority of nations have signed at least one of the more than 350 trade agreements that are now in effect worldwide.
India-UK Free Trade Agreement Explained in 15 Points
Significant economic gains are anticipated for both India and the UK as a result of the free trade agreement and Double Contribution Convention accord.
Over time, the free trade agreement is expected to increase bilateral trade by £25.5 billion, increase UK GDP by £4.8 billion, and raise wages by £2.2 billion yearly. By 2030, the bilateral commerce is predicted to double from its current $60 billion to $120 billion.
We examine 15 key points of the proposed free trade agreement between the UK and India:
1. 99 percent of Indian exports will have duty-free access to UK markets thanks to the trade agreement. By eliminating tariffs on around 99 percent of tariff lines, or about 100 percent of trade value, India stands to benefit greatly.
2. 90 percent of tariff lines will be modified to significantly lower Indian import tariffs.
3. 85 percent of these products will be fully tariff-free in ten years.
4. The UK's free trade agreements will also benefit India in a number of service areas, such as financial, professional, educational, and IT/ITeS services.
5. As India agrees to reduce tariffs on a number of goods, including lamb, medical equipment, whiskey, and sophisticated technology, trade obstacles will be removed, making UK exports more competitive.
6. Additionally, under a designated quota system, automobile tariffs will be drastically lowered from above 100% to 10%.
7. The import taxes on gin and whisky will be lowered from 150 percent to 75 percent at first, and then to 40 percent over the course of a decade.
8. Lower import taxes on a range of goods are part of the free trade deal, which benefits Indian consumers and businesses alike. These consist of soft beverages, chocolate, biscuits, medical equipment, salmon, cosmetics, lamb, aircraft components, and electrical machinery.
9. The three-year remission of social security contributions for Indian employees working in the UK is a noteworthy accomplishment. Indian service companies stand to gain significant cost savings as a result of the Double Contribution Convention's three-year social security contribution remission for Indian employees and their employers temporarily stationed in the UK.
10. As the UK lowers its import taxes, consumers may save money on a variety of goods, such as clothing, footwear, and food products like frozen prawns.
11. India's job situation will improve significantly as a result of the FTA.
12. Textiles, marine items, leather, footwear, sports goods and toys, gems and jewelry, engineering goods, auto parts and engines, and organic chemicals are among the industries that will have additional export opportunities as a result of the deal.
13. India receives important guarantees on the provision of digital services, including those in the fields of architecture, engineering, computers, and telecommunications.
14. Contractual service providers, business travelers, investors, intra-corporate transferees, family members of transferees with work authorization, and independent professionals like yoga instructors, musicians, and chefs can all travel more easily thanks to the agreement.
15. India intends to implement strategies to effectively tackle non-tariff barriers, guaranteeing unhindered trade in goods and services while avoiding unjustified restrictions on its export operations.
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