After three years of talks, the UK and India have agreed a free trade deal that both sides say will double bilateral trade between the world’s fifth- and sixth-largest economies by 2030.
But the accord is not without controversy, particularly around changes to rules on Indian workers being seconded to the UK, and the British government’s outline of the agreement said work was still required to “resolve the last issues” including auto quotas and carbon border taxes.
Trade experts said the overall deal — which will increase long-run UK GDP by 0.1 per cent a year, according to the government — was focused more heavily on goods than services, reflecting New Delhi’s longtime reluctance to open its markets in those areas.
How significant is the national insurance waiver?
The most contentious part of the deal for the UK is an allowance for both Indian employers and employees on short-term transfers to avoid paying national insurance contributions in the UK, under a double contribution convention.
Indian intra-company transfer (ICT) workers and their employers will now enjoy the benefit for three years, up from one year — an allowance that was hailed by the Indian government.
The UK did not mention the waiver in its initial announcement of the deal but later defended it after criticism from opposition parties, pointing to similar double taxation accords between London and 50 other countries.
But a spokesperson for Conservative leader Kemi Badenoch on Wednesday said the UK’s existing agreements were with countries that had broadly the same standard of living and wage structures as Britain.
The spokesperson called for ministers to publish an impact assessment both for the lost revenue and the number of Indian workers likely to be seconded to the UK.
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Data from the government’s advisers on migration suggests India is already one of the leading countries for ICTs in the UK, particularly among large IT services and consulting groups.
A 2021 paper by the Migration Advisory Committee (MAC) showed two-thirds of ICT workers were now defined as contractors, meaning they could carry out work for third-party companies.
The paper contained data from 2019 showing 97 per cent of those ICT contractors in the UK were Indian nationals.
Of the 26,700 Indian ICT contractors in the UK, the same data showed more than half were employed by just four India-linked companies: Tata Consultancy Services, Cognizant Worldwide Ltd, Wipro Ltd and Infosys Ltd.
By contrast, the UK sends few workers to India on ICT transfers, though the government argues this could rise because of the deal.
Will the UK take a financial hit from the waiver?
One senior Indian official suggested the saving for Indian companies on ICT contractors would be roughly 20 per cent of salary costs.
Badenoch’s spokesperson said the Tories’ own rough calculations when in government suggested scrapping national insurance for ICT workers from India would cost £100mn-£200mn in lost revenue each year.
The government has said Indian companies will still pay social security on employee salaries in India, and that Indian contractors will not gain a UK state pension and will still have to pay a surcharge to access the NHS.
But Indian IT workers often have lower salaries than UK peers. The MAC in 2021 said the average salary for ICT contractors was about £41,500, clustering at the level necessary to meet the UK’s then minimum salary threshold to be considered for an ICT.
Employers can meet the salary threshold by including housing allowances, meaning actual pay can be lower.
What does the deal say about trade in goods?
Under the agreement taxes on more than 90 per cent of UK exports to India will be cut, with cosmetics, clothes and food and drink products registering some of the largest reductions, which will be phased in over a 10-year period.
The UK, which has much lower tariffs, will eliminate levies on almost all Indian imports.
Big UK winners will be whisky and gin producers, which will see tariffs halve to 75 per cent immediately and fall to 40 per cent by the 10th year of the deal.
Karen Betts, chief executive of the Food and Drink Federation, a lobby group, welcomed the deal as a “significant opportunity” to increase exports of UK food products to India, which hit almost £300mn in 2024.
But the benefits of the agreement for other sectors were less clear. The UK said it had secured “a quota” to reduce tariffs on UK auto exports from more than 100 per cent to 10 per cent, but did not specify a quota size.
The Society of Motor Manufacturers and Traders said the deal was “the first partial liberalisation of the Indian automotive market” but that it would “likely feature compromises”.
The UK deal document also made no mention of pharmaceuticals, a sector that was the subject of a big row in 2022 when a leaked draft text of the accord showed London was pushing for changes to Indian intellectual property laws to protect makers of branded medicines.
How will trade in services be affected?
The deal promises improved access to India for UK professional services firms, after long-term “significant challenges” in entering the market, according to the UK document.
Trade bodies will be encouraged to agree on mutual qualification recognition, and “non-discrimination rules” will ensure UK services firms are “treated fairly” when operating in India.
Indian officials said investor-state dispute resolution remained a sticking point.
Companies including the Big Four accounting firms, as well as consulting giants such as Accenture, rely on vast offshore operations in India to service UK businesses at lower cost.
On overall liberalisation, trade experts said the balance of the accord seemed to favour India.
David Henig of ECIPE, a think-tank, said: “India talks of benefiting from the ‘most ambitious’ UK commitment on services, while the UK simply talks about ‘market certainty’ for its firms.
“While we need to see the detail, this implies the UK has offered India something beyond World Trade Organization commitments, but India hasn’t offered likewise.”
