A Free Trade Agreement (FTA) is a deal between two or more countries to remove or reduce taxes (tariffs) and limits (quotas) on goods and services that they buy and sell to each other. This helps to make trade easier and cheaper. For example, if India exports mangoes to the UK, the UK may charge less or no tax on them. Similarly, India may reduce taxes on goods like whisky or cars coming from the UK.

The idea behind such agreements is to grow trade, create jobs, and give people better and cheaper products. Free trade is the opposite of protectionism, where countries try to protect their own industries by putting high taxes on foreign goods or limiting how much can come in.

However, FTAs don’t mean all rules are removed. Countries still control the import of certain things like unsafe drugs, unapproved food items, or animals without proper checks.

Key points of the India-UK Free Trade Agreement

India and the UK have officially signed a Free Trade Agreement in a historic step. The deal was signed during PM Narendra Modi's visit to the UK, in the presence of British PM Keir Starmer. Commerce Minister Piyush Goyal and his UK counterpart, Jonathan Reynolds, signed the agreement.

Let’s break down what this trade deal means in simple words:

1. Bigger trade goals

  • Both countries want to increase their trade to $120 billion by 2030, which is double the current value.
  • In 2023-24, total trade between India and the UK was $21.34 billion, a rise from $20.36 billion in 2022-23.
  • India's exports to the UK grew by 12.6%, and imports rose by 2.3% in 2024-25.

2. Duty-free exports and cheaper imports

  • 99% of Indian exports will now enter UK markets without any tax. This includes things like textiles, leather goods, marine products, jewellery, toys, and engineering items.
  • On the other hand, the UK’s goods coming into India will face lower taxes. For example:
    • UK whisky and gin will see taxes fall from 150% to 75%, and later down to 40% in ten years.
    • UK cars will get cheaper too, with taxes dropping from over 100% to 10%, though some limits will apply.
    • Other British items like cosmetics, chocolates, biscuits, soft drinks, medical equipment, salmon, and machinery will also become cheaper for Indian buyers.

3. Boost for Indian farmers and agri-businesses

  • India exports around $36.6 billion worth of farm products globally.
  • The UK imports $37.5 billion worth of farm goods, but only $811 million comes from India. So, there is a big chance for India to sell more of its tea, mangoes, spices, seafood, and other special products to the UK.

4. Better opportunities for professionals

  • The deal will allow more professionals to work in the UK. This includes:
    • Yoga teachers, chefs, musicians, business visitors, engineers, and others.
    • They can even take their partners and children, who will also have the right to work.
  • A Social Security Agreement has also been finalised. This means Indian workers in the UK won't have to pay double for pension or social security benefits when working temporarily.

The agreement has been signed, but it still needs approval from the UK Parliament, which may take about a year. Once approved, the agreement will come into action, and people and businesses in both countries will start seeing the benefits.

This Free Trade Agreement is a big step forward in making the India-UK partnership stronger. It will help Indian businesses grow exports, allow Indian buyers to get cheaper and better-quality products, and open doors for professionals and workers. Overall, it is expected to create new jobs, investments, and better trade relationships between the two countries.

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