Modi’s London Visit Seals Historic UK-India Trade Pact Amid Global Tensions

Published: 23 July 2025. The English Chronicle Desk | The English Chronicle Online

In a watershed moment for both economies, Indian Prime Minister Narendra Modi has embarked on a state visit to the United Kingdom to formally sign a long-anticipated free trade agreement that promises to reshape the commercial contours between the two nations. The deal, hailed as the most significant post-Brexit trade pact for Britain and India’s first major free trade agreement outside Asia, arrives at a time of growing global protectionism and economic fragmentation, offering a rare note of bilateral optimism.

Modi’s two-day visit, which began Wednesday, marks his fourth official trip to the UK as India’s prime minister. It features high-level diplomatic engagements, including detailed talks with British Prime Minister Keir Starmer on issues ranging from trade and defence to technological cooperation and cybersecurity. A ceremonial audience with King Charles is also scheduled during the visit, reinforcing the symbolic depth of the UK-India relationship.

At the heart of the visit is the landmark trade deal that seeks to eliminate or reduce tariffs on a wide range of goods while also opening new corridors for investment, skilled labour movement, and regulatory alignment. For India, the agreement is a demonstration of its growing assertiveness in international trade negotiations, especially as it secured key concessions from the UK on work visas, mutual recognition of professional qualifications, and temporary national insurance exemptions for Indian professionals.

The free trade agreement—still pending ratification by both nations’ parliaments—has already drawn strong reactions across the political and economic spectrum. Under the deal’s framework, 99% of India’s exports to the UK, including textiles, gems, leather goods, machinery, and processed foods, will benefit from zero tariffs. In exchange, Britain will see phased reductions on duties for 90% of its exports to India, with major wins for the UK’s whisky and automobile industries.

Among the most celebrated outcomes for Britain is the drastic cut in duties on Scotch whisky—from the current 150% to 75% immediately, with a further slide to 40% over the next decade. Tariffs on British cars, which now face over 100% in import duties, will be gradually reduced to 10% under a quota system. Medical equipment, pharmaceuticals, aircraft components, and electronics are also set to benefit from relaxed trade barriers.

While London touts the deal as a post-Brexit diplomatic triumph, New Delhi frames it as a strategic advance in its “Make in India” initiative, aiming to rejuvenate manufacturing and export-led job creation. India’s commerce ministry, led by Piyush Goyal, estimates that more than five million export-related jobs could be linked to the expanded access to UK markets. For Indian labour-intensive sectors such as garment manufacturing and food processing, the tariff reductions could translate into tangible economic dividends.

However, the pact has not been without controversy or compromise. Notably, India succeeded in excluding agriculture—a sector employing over 40% of its population—from the negotiations, citing concerns about domestic vulnerability. This exclusion echoes similar sticking points in India’s stalled trade talks with the United States and signals New Delhi’s cautious approach to liberalizing politically sensitive sectors.

Despite the deal’s celebratory framing, some observers warn of storm clouds on the horizon. Indian whisky manufacturers have already raised concerns about unfair competition from the UK, arguing that the duty cuts on Scotch threaten domestic brands. Similarly, the British side has tempered expectations due to the exclusion of financial and legal services from the final deal. A bilateral investment treaty, long viewed as essential for investor confidence, remains unresolved.

Another critical omission is the UK’s proposed carbon border adjustment mechanism (CBAM), a climate-linked tariff designed to impose duties on imports from countries with looser emissions regulations. India, which has vocally opposed the measure on grounds of fairness and development equity, successfully kept CBAM off the table for now. Still, experts caution that the issue remains unresolved and could re-emerge as a flashpoint in future trade dynamics.

Ajay Srivastava of the Global Trade Research Initiative in New Delhi has warned that the carbon tax, if implemented, could severely undercut Indian exporters and “wipe out the gains” from the free trade agreement. Likewise, Sanjaya Baru, a veteran Indian economist, noted that while the broad contours of the pact are encouraging, “we will have to look at the fine print the morning after.”

The UK, meanwhile, sees this deal as a strategic and economic imperative in the wake of Brexit, eager to diversify its trading partners beyond the European Union. As Britain’s most economically substantial agreement since its departure from the EU, the FTA with India holds the potential to recalibrate its trade narrative amid ongoing global economic uncertainty.

The symbolism of this pact runs deep. It ties together two former colonial powers in a new commercial partnership driven by mutual interest, not historical baggage. As Prime Minister Starmer’s office put it, the agreement “ushers in a new era of UK-India collaboration, one rooted in economic dynamism, shared democratic values, and global cooperation.”

In the coming months, as the deal moves through the legislative processes of both countries, analysts will be watching closely for implementation details, sectoral responses, and diplomatic follow-through. For now, though, as Prime Minister Modi receives the royal welcome in London, the historic nature of this agreement marks a notable high point in Indo-British relations in the 21st century.