The India-UK Free Trade Agreement Provides Protection for Domestic Automobile Production
India and UK’s Strategic Free Trade Agreement: A Comprehensive Overview
India has made significant duty concessions regarding automobile imports from the UK as part of the recently finalized Free Trade Agreement (FTA), while also implementing measures to protect its domestic auto industry. This approach comes in response to the UK’s keen interest in exporting electric vehicles (EVs), coinciding with its ban on the sale of new petrol and diesel vehicles by 2030.
According to a senior government official, while India has agreed to reduce import duties on UK automobiles from 100% to 10% under the FTA finalized on May 6, this reduction will not be uniformly applied across all vehicle categories. “The offer made by India is quite detailed and tailored. The reductions in duties and the quotas will depend on both the vehicle’s price and engine capacity,” the official clarified. Moreover, for eligible vehicle segments, the duty relief will be introduced gradually over ten years and will be subject to specific quotas.
The UK’s strong push for electric vehicles aligns with its ambitious electrification goals. The country is set to prohibit the sale of new petrol and diesel cars by 2030 and require that all light vehicles, including cars and vans, be zero-emission by 2035. Given this transition, it is unlikely that the UK will continue to produce separate lines of petrol and diesel vehicles for export markets like India. Currently, 80% of the automobiles produced in the UK are meant for export, with Europe being the primary market.
The India-UK FTA aims to lower tariffs on 99% of Indian exports and will facilitate British companies in exporting whisky, automobiles, and various other products to India, thereby enhancing the overall trade volume. The objective is to double bilateral trade from the current $60 billion by 2030. Under the FTA, India’s tariff concessions will take effect once the agreement is ratified. From India’s viewpoint, 90% of exports from the UK will benefit from reduced tariffs, with 85% of these tariff lines expected to become fully duty-free within a decade.
The final details of the agreement are still being finalized, with a legal vetting process—referred to as “legal scrubbing”—anticipated to take three months. Following this, the agreement will undergo ratification in the UK Parliament, a process that could extend for up to a year. Thus, full implementation of the FTA is projected to be approximately 15 months away.
“In terms of benefits, the agreement favors the services sector more than goods,” the official noted. In 2024, bilateral trade between India and the UK reached $56.76 billion, with services accounting for around 58% of the total. India’s exports of goods to the UK were valued at $14.38 billion, while services exports amounted to $19.57 billion. In contrast, the UK’s goods exports to India reached $9.32 billion, with services exports totaling $13.45 billion.
