NEW DELHI – India’s landmark trade agreement with Britain marks a strategic pivot in its historically cautious trade policy, balancing gradual market liberalisation with strong protections for key domestic sectors. Analysts and officials said the deal could serve as a template for future trade agreements as India eyes pacts with the European Union, the United States, and New Zealand.
Signed on Thursday, the agreement was hailed by Prime Minister Narendra Modi as “a blueprint for our shared prosperity” and represents India’s most significant strategic partnership with an advanced economy. The pact arrives at a time of rising global trade tensions and reflects India’s effort to modernise its trade framework without compromising critical economic interests.
One of the most significant aspects of the deal is India’s commitment to cut tariffs on imported British vehicles, a notable departure from its long-standing protectionist stance. The automotive industry, which accounts for nearly 7% of India’s GDP, has traditionally been shielded by steep import duties.
“This is a policy shift, especially as India has long used high tariffs to protect domestic manufacturers,” said Ajay Srivastava, founder of the Global Trade Research Initiative and a former Indian trade negotiator. He noted that similar relaxations on government procurement and pharmaceuticals could be seen in India’s upcoming deals with the EU and the U.S.
However, the liberalisation remains measured. Vehicle imports under the deal will be capped through a quota system and phased tariff cuts. India has agreed to reduce auto tariffs from more than 100% to 10% over a 15-year period, starting with an annual import quota of 10,000 vehicles and increasing to 19,000 by the fifth year. Tariffs on British whisky and other products will also be reduced gradually, giving Indian industries time to adapt.
Despite this shift, India has held firm on its traditional red lines. The deal makes no concessions on sensitive agricultural items such as apples and walnuts or dairy products including cheese and whey. “There is no question of opening up the agriculture or dairy sector in any trade negotiation — be it with the EU, Australia, or even the U.S.,” said a senior Indian official.
The official emphasised that India’s trade strategy aims to support growth while protecting millions who rely on subsistence farming and low-margin work. Nonetheless, Indian agricultural exporters expect to gain broader access to the UK’s $37.5 billion agriculture market.
Indian industries stand to benefit significantly. The agreement ensures zero tariffs on a range of goods including textiles, footwear, gems, furniture, auto parts, machinery, and chemicals. “With zero tariffs, India’s garment exports to the UK could double in three years,” said N. Thirukkumaran, general secretary of the Tiruppur Exporters Association. He added that the deal also sets the stage for a larger EU agreement, which could yield even greater economic gains.
Still, India’s evolving trade posture may face tougher scrutiny in future negotiations. Talks with the U.S. under President Donald Trump’s administration could prove more challenging, especially as Washington pushes for expanded access to India’s agricultural and dairy sectors. Trade Minister Piyush Goyal told Reuters on Thursday that India is hopeful of reaching a mutually beneficial agreement with the U.S. that includes “special and preferred treatment.”
India’s new trade approach reflects a broader ambition to integrate with global markets while cautiously defending domestic interests — a balancing act that will define its path in the shifting dynamics of international trade.