After three years of on-off negotiations, India, which is currently the fifth largest economy in the world, has struck a trade deal with the UK, the sixth largest. The British government has called it a "landmark" agreement, while Indian Prime Minister Narendra Modi has described it as a historic milestone that is "ambitious and mutually beneficial." Given that exports to India account for merely 1.9% of total British exports, and its imports from India constitute only 1.8% of its total imports, at a perfunctory glance, it might not seem to be such an impact-making deal deserving the encomiums it has earned from both parties.
Yet, what imparts importance to the deal is not the sums involved, but the timing, it being a win for free trade at a time when US President Donald Trump's sweeping tariff campaign has raised fears of tit-for-tat trade wars, and unleashed a virtual tsunami wave of protectionism across all continents.
In fact, it was the spectre of a trade war which had given an impetus to both parties to quickly settle the negotiations and conclude the deal, there- by setting an example of mutual accommodation between the two nations to be emulated by others in order to counter-balance the destabilisation of global trade unleashed by the US President. Significantly, the agreement did not include any change in immigration policy, including towards Indian students studying in the UK.
Through this deal, which will come into effect within a year, tariffs would be lower for Indian imports on British goods like gin and whisky, aerospace, electricals and medical devices, cosmetics, lamb, salmon, chocolates and biscuits, and high-value cars.
British consumers would benefit from lower tariffs on goods coming from India, which will include clothing and footwear, cars, foodstuffs including frozen prawns, jewellery and gems. In what is being dubbed an outstanding achievement, the deal provides for some Indian and British workers gaining from a three-year exemption from social security payments, the exemption applying to the staff of Indian companies temporarily transferred to the UK, and to UK firms' workers transferred to India.
The deal also includes provisions on the services sector and procurement, allowing British firms to compete for more contracts, implying that it will be a win for both parties - India benefiting from increased foreign investments and Britain getting a toehold in the expanding Indian market.
The deal would result in trade between the UK and India, currently amounting to £42.6 billion, being boosted by an additional £25.5 billion a year by 2040. Both nations expect that this deal will catalyse trade, investment, growth, job creation, and innovation in the two economies and make the UK and India high-priority trade partners. Above all, such a deal will act as a re- buff to the Trumpian endeavour to promote protectionism in global trade, and highlight the benefits of mutual cooperation.