India and Britain Sign Landmark Bi-Lateral Trade Deal

What Happened?

This week British Prime Minister Ken Starmer and Indian Prime Minister Modi signed a bilateral trade deal between the two nations. At the center of the new deal lies a reduction in tariffs between India and Britain, including a fifty percent reduction in tariffs on whisky and gin along with a ninety percent reduction in tariffs on cars. Overall, India agreed to reduce tariffs on ninety percent of products sold in the world’s sixth largest economy.

In return, Britain agreed to reduce tariffs on Indian goods such as food, clothing, and footwear. According to the British government, the new trade deal will boost yearly trading between the two countries by thirty-four billion U.S. dollars over the next decade.

Why it Matters

The new trade agreement between the world’s fifth and sixth largest economies could herald a new round of bilateral deals worldwide according to the Economist. The logic is solid, because bilateral deals like this one provide ways for growing economies to improve trade without running into more tariffs, like those imposed by the U.S. on China and China on the U.S.

Sam Lowe of Flint Global said, ‘This deal will definitely set a precedent.’ A separate and much larger trade deal between the European Union and India had hit an impasse in the past few months. But the British – India deal could offer a blueprint for how to revive that deal and push forward.

Despite the lowering of tariffs between India and Britain, there were some points of disagreement. India’s request for more visas for Indian workers to go to Britain was not approved by the British government, though they could revisit that request at a later date. The refusal of the British government to grant more visas likely reflects souring public opinion on immigration in Britain, which is often blamed for many of the social and economic problems facing the country. 

The new deal is significant for India, which has signed few such deals in the past and never with such open terms. Modi’s agreement to the deal indicates he recognizes that in order to move forward with India’s industrialization and modernization, India will have to be more open to trade with other countries. 

India is now the world’s most populous country, and as such it is potentially a huge market for foreign companies to find new customers. Elon Musk is one example, having made progress on getting India to approve Starlink internet access.

How it Affects You

The opening of India to new trade deals and foreign goods could be a boon for the world’s economy. China underwent a turbulent period of rapid economic growth in the 2000s, and India could be about to embark on a similar national trajectory now.