Prime Minister Narendra Modi announced on Tuesday that India and the United Kingdom (UK) have successfully concluded a Free Trade Agreement (FTA) and a Double Contribution Convention.

On X, Modi posted, "I am delighted to address my friend, PM Keir Starmer. In a historic moment, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, as well as a Double Contribution Convention. These landmark agreements will strengthen our Comprehensive Strategic Partnership and boost trade, investment, growth, job creation, and innovation in both our economies. I look forward to hosting PM Starmer in India soon."

The agreement came after three years of on-again, off-again negotiations. It aims to increase bilateral trade by an additional 25.5 billion pounds by 2040, through liberal market access and fewer trade restrictions.

The deal reduces tariffs on goods like whisky, advanced manufacturing components, and food products such as lamb, salmon, chocolates, and biscuits. It also sets auto import quotas for both nations.

The UK government stated that India will lower tariffs on 90 percent of UK imports, with 85 percent of those becoming tariff-free over the next decade. Additionally, it said that India would reduce whisky and gin tariffs on UK imports by 75 percent and cut auto tariffs to 10 percent under a quota.

Both countries are also pursuing bilateral agreements with the United States to remove some of Trump’s tariffs, which disrupted the global trade system. This has brought attention to the importance of finalising a UK-India trade deal in both London and New Delhi.

The UK government estimates that the deal will add 4.8 billion pounds annually to its GDP by 2040.

"We are in a new era for trade and the economy. That means going further and faster to strengthen our economy," British Prime Minister Keir Starmer stated.

He continued, "Strengthening our alliances and reducing trade barriers with economies around the world is part of our plan for change to build a stronger and more prosperous economy at home."

Negotiations have covered three key areas: the FTA, a Bilateral Investment Treaty, and a social security pact known as the Double Contribution Convention Agreement. This agreement allows India to open up its protected markets, including automobiles.

India and the UK first began discussions on a free trade deal in January 2022. This was viewed as an important aspect of Britain's independent trade policy after leaving the European Union.

However, the talks faced delays, with Britain having four different prime ministers since the discussions began and elections in both countries last year.

A total of 14 rounds of negotiations were held between India and the UK for the FTA. Bilateral trade between the two countries grew to $21.34 billion in FY24, up from $20.36 billion in FY23. The two nations aim to double their bilateral goods trade in the next decade, from the current $20 billion.

The social security pact, officially called the Double Contribution Convention Agreement, aims to prevent Indian professionals working temporarily in the UK from contributing to social security funds twice. These professionals contribute to the funds while employed in the UK but cannot access the benefits, as they return to India once their projects are completed.