Which key demands India and UK dropped to reach multi-billion-pound free trade agreement?

India and the UK mutually agreed to drop politically sensitive demands on post-study work visas and legal services to pave the way for the finalisation of a landmark free trade agreement (FTA), PTI reported, citing an official on Wednesday.

The breakthrough came as Commerce and Industry Minister Piyush Goyal concluded talks with UK Business and Trade Secretary Jonathan Reynolds in London last Friday, culminating in the confirmation of the FTA on Tuesday.

The deal, expected to add GBP 4.8 billion annually to the British economy by 2040, includes tariff reductions on 90% of goods traded between the two countries.

While New Delhi gave up its push for expanded post-study work rights for Indian students in Britain, London agreed to withdraw its demand for liberalising India’s legal services sector, a long-standing issue linked to the Advocates Act and regulated by the Bar Council of India.

“Both the countries have respected each other's sensitivities. Post-study work visas were politically sensitive for the UK as legal services were for India. We agreed to drop our ask on post-study work visa in lieu of the UK dropping its ask on legal services,” PTI quoted the official as saying.

Among the headline outcomes for the UK are tariff cuts on Scotch whisky, slashed from 150% to 75%, and a reduction in automotive tariffs from 100% to 10% under a quota system.

According to the UK Department for Business and Trade (DBT), besides whisky and gin, tariff reductions have also been achieved on products such as medical devices, advanced machinery and lamb.

Based on 2022 data, the deal will see India reduce tariffs worth GBP 400 million upon implementation, doubling to around GBP 900 million in a decade.

India restarted FTA negotiations with the UK in February this year, after a pause due to general elections. The agreement also includes provisions for temporary entry and stay of professionals in sectors like IT, business services, and the creative arts. The UK has committed mobility access in 36 sub-sectors under contractual services and 16 under independent professionals, including allowances for up to 1,800 individuals per year.

Indian exporters are set to benefit from zero-duty access to the UK market for a wide range of goods, including textiles, gems and jewellery, processed foods, chemicals, and machinery. Currently, these attract duties ranging from 2 to 20%.

Industry bodies hailed the agreement as a major boost for Indian exporters. Federation of Indian Export Organisations (FIEO) President S C Ralhan described it as a “landmark step” for enhancing trade and investment ties.

A Sakthivel, Vice Chairman of the Apparel Export Promotion Council (AEPC), termed the FTA a “transformative milestone” for the textile industry, while AEPC Chairman Sudhir Sekhri called it “a bonanza” for Indian apparel exporters.