What is in the UK-India trade deal?

On 6 May the UK government announced that a UK-India Free Trade Agreement had been agreed, but what does the deal entail and what does it mean for the UK economy?

What does the India trade deal contain?

Key areas of the UK-India free trade agreement (FTA):

What are the economic benefits for the UK?

The FTA agreed with India is due to deliver a 0.1% boost to the UK’s economy by 2040, the equivalent of £4.8 billion. When it comes to exports the government's modelling has estimated that British exports to India will grow by £15.7 billion by 2040, whilst Indian exports to the UK will grow by £9.8 billion. 

How does this compare to other trade deals?

Compared to the trade deals agreed by the previous Conservative government this trade deal will deliver more economic growth in the long-run than:

HOWEVER the economic benefit of all of these trade deals combined (Australia, India, Japan and New Zealand) pales in comparison to the potential GDP growth delivered by a common sense deal with the EU. 

The combined GDP boost delivered by these four trade deals delivers just 0.28% GDP growth in the long term for the UK. In comparison a deal with the EU which delivers deeper alignment on goods and services would deliver 2.2% GDP growth in the long-term, according to independent research carried out by Frontier Economics

Despite the positivity of agreeing an FTA agreement with India, the government must now switch their focus to delivering a common sense deal with the EU as the May 19 UK-EU summit approaches, a deal which would deliver around eight times more GDP growth than all four of the previously mentioned trade deals combined.

What does the National Insurance exemption mean?

Much has been made of the National Insurance exemption for some Indian workers included in the FTA, with the Conservatives claiming this creates a "two-tier" tax system. However, this agreement only applies to some Indians in specific skilled occupations, working in the UK temporarily while employed by a company based in India. The deal is also reciprocal, which means that British citizens working for British companies who are seconded in India for a short time are exempt from paying Indian social security. 

Fundamentally, this means that temporary workers posted to each other's jurisdictions by their companies should not have to contribute to two parallel social security schemes at the same time.

The UK already has similar agreements with more than 50 countries such as; 

  • Barbados

  • Bermuda

  • Bosnia-Herzegovina

  • Canada

  • Chile

  • European Union

  • Guernsey

  • Iceland

  • Ireland

  • Isle of Man

  • Israel

  • Jamaica

  • Japan

  • Jersey

  • Kosovo

  • Lichtenstein

  • Mauritius

  • Montenegro

  • New Zealand

  • North Macedonia

  • Norway

  • Philippines

  • Serbia

  • South Korea

  • Switzerland 

  • Turkey

  • USA

Next
Next

Welcome India trade deal no substitute for closer EU ties