UK and India about to sign landmark trade deal but not everyone's happy

Sky News

23-07-2025

As India and Britain look set to sign a free trade agreement (FTA), some industries are disappointed and want a level playing field.
The Indian cabinet has given its consent to the deal as Prime Minister Narendra Modi is headed to the UK to sign it with his British counterpart Sir Keir Starmer.
The pact, formally called a comprehensive economic and trade agreement, will now have to be ratified by the British parliament, which could take several months.
For Britain, this is the biggest and most economically significant bilateral trade deal since it left the European Union. The government says the deal is expected to add £4.8bn to the economy and £2.2bn in wages every year in the long run.
Britain is the sixth-largest investor in India, with cumulative investments of around $36bn. There are at least 1,000 Indian companies operating in the country, employing more than 100,000 people, with a total investment of $2bn.
At a time when countries are trying to navigate the turbulent effects of US President Donald Trump's tariff upheaval, this pact comes as a great economic boost for both countries.
What's in the deal
Once made law, the agreement will reduce 90% of tariffs on British exports to India that include whisky, cars, cosmetics, salmon, lamb, medical devices, electrical machinery, soft drinks, chocolate, and biscuits.
India will get a zero-tariff deal on 99% of its tariff lines, covering nearly 100% of trade value. These include clothes, footwear and food products, including frozen prawns. With a zero tariff on textiles and apparel, Indian exports will get the same advantage as countries like Bangladesh and Vietnam.
India has got concessions on easy mobility for its professionals, including contractual suppliers and intra-corporate transferees with dependents.
The Double Contribution Convention (DCC) that ensures employees temporarily working in the UK for up to 3 years will continue paying social security contributions in their home country.
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India will reduce duties from 100% to 10% for a limited number of imports of cars, while Britain will give access to its markets for electric and hybrid vehicles.
Both countries have agreed to provide national treatment (same treatment as domestic companies) in select services, including telecom, construction and environment.
Areas of concern
But it's Scotch whisky that has been a bone of contention in the negotiations. The UK has bargained hard, and tariffs have been slashed from 150% to 75% while retaining the issue of maturation of Scotch.
Whisky to be classified as Scotch needs to mature for at least three years. During this process, a small amount - dubbed the "angel's share" - evaporates due to climate and casks.
Anant S Iyer, director general of the Confederation of Indian Alcoholic Beverage Companies (CIABC), representing Indian manufacturers, told Sky News: "India has a tropical climate - the process of maturation is much faster. While in Scotland, the evaporation losses are around 2% a year, here it's about 10-15% yearly, depending on where you're distillery is based.
"So, a one-year-old mature Indian whisky could be equal to about a three-year-old Scotch whisky. This non-tariff barrier is something that's causing us a huge setback."
Indian manufacturers lose a third of volume over a three-year maturation period, which makes it unviable for them.
Mr Iyer says, "while the FTA does bring cost savings for our blended whiskies, it will also open the floodgates for cheaper products from a plethora of Scotch brands in the UK".
India is the largest whisky market in the world by volume, and Scotch has just 3% of that.
According to the Scotch Whisky Association, which represents over 90 companies, India is its largest export market by volume, with more than 192 million bottles exported in 2024.
Despite the deal, there is still little clarity on issues of "rules of origin", a provision to help contain the dumping of goods; UK carbon tax, a concern for India as it could restrict the export of metal products; and the issue of international arbitration.