The UK-India Free Trade Agreement: A bit of a Damp Squib...?

After three years of negotiations the UK has finally managed to sign a trade deal with India. The government is heralding this as a major win, and most significant UK trade deal since Brexit... but is it really all that...?

From Brexit to New Beginnings

Brexit was a disaster for the UK: losing easy access to EU markets has cost the nation a fortune, and the Indian trade deal has gone some way to compensating for that... India has an enormous population of 1.4 billion and an expanding middle class, there is a huge market for British exporters.

The deal is expected to add a further £4.8 billion per year to the UK economy by 2040.

What's in the Deal?

Somewhat ironically, given Trump's obsession with them, at the heart of the deal lie Significant tariff reductions that should result in increased trade flows between the two countries. Previously around 90% of products were subject to tariffs, and pretty much all of these have been reduced.

One of the largest reductions is with cars, these had more than 100% tariffs, now reduced to just 10%.

But the biggest winners are Whiskey and Gin exporters. previously these had a 150% tariff, this is now coming down to 75% immediately and reducing to 40% over 10 years.

Reading Between the Lines

Not everyone is partying over the agreement. A 0.1% boost to UK GDP by 2040 is underwhelming, and this falls way short of the projected 4% long-term loss of GDP resulting from Brexit.

The financial and legal sectors had hoped for a bilateral investment treaty to make long-term vesting in India easier, but that's missing.

Final Thoughts

While this is a step forward for UK business, it's a bit of a lack lustre deal, but maybe that's a marker of success, with a good deal, neither party should be too happy with the result!

Time will tell how successfully British Business can negotiate the new rules.

Posted Using INLEO