“The agreement text will be publicly released only after this phase is completed,” one of the officials said. “Both sides will review each chapter, and the FTA will not take immediate effect due to procedural formalities.”
Legal vetting or ‘scrubbing’ is the final review of a trade agreement’s text to ensure legal clarity, consistency, and accuracy across all chapters before official release and ratification by the parties involved.
Also read: Why the India-UK FTA has spooked medical device manufacturers. Hint: China
The legal scrubbing team for FTAs typically includes officials from the department of commerce’s trade policy division and legal officers from the law and justice ministry. They are supported by external trade law experts, with inputs from other ministries like finance, agriculture, or environment, depending on the agreement’s scope.
“We have announced the successful conclusion of negotiations, as agreed by both Prime Ministers,” the official cited above said. “The next step is to decide, in mutual agreement, how much information will be released publicly. What we are sharing now are the broad contours of the agreement.”
This official added that the FTA is not just a trade agreement between the world’s fifth and sixth largest economies, but a strategic economic partnership, reflecting the growing depth of their relationship beyond trade.
The negotiations were earlier delayed due to two critical issues—relaxation of duties on spirits and automobiles.
The second official cited above said that India has agreed to reduce tariffs on both, but it will not hurt Indian industry. “Instead, it will benefit consumers by giving them access to genuine Scotch whisky,” the official said. “This decision is backed by data. India’s total liquor imports are around $500 million, which is not a significant figure. Moreover, this move could open new doors for Indian liquor manufacturers in overseas markets.”
Also read: India-UK FTA a shot in the arm for India’s green energy manufacturing space
According to the final terms, the duty on Scotch whisky has been reduced from 150% to 75%, and will be brought down further to 40% over the next 10 years.
Similarly, the duty on automobiles has been cut from 100% to 10%, effective gradually over a few years after the FTA takes effect. However, vehicle imports will be allowed only under a fixed quota. The size of the quota is not immediately clear, but it is likely to be insignificant compared to the size of India’s domestic car market.
The provisions on automobile imports also say that only futuristic vehicles—likely referring to electric or advanced technology cars—will be allowed to be imported into India. Entry of cheaper vehicles has been restricted to protect domestic manufacturers. “Import conditions have been carefully designed to favour future-ready vehicles while discouraging low-cost car inflows,” the second official cited above said.
To be sure, the UK has eliminated tariffs on 99% of its exports to India, covering nearly the entire trade value, as the two nations aim to double bilateral trade to $120 billion by 2030.
Also read: Donald Trump to make ‘major trade deal’ announcement with a BIG country, says ‘the first of many’
Post-signing, the FTA will be ratified by the UK Parliament, while in India, ratification will take place through a Union cabinet meeting chaired by Prime Minister Narendra Modi. The deal will be formally signed after the legal scrubbing is concluded and, after ratification by both sides, will come into effect.
As per procedure, in the UK, international treaties such as FTAs typically require presentation before Parliament under the Constitutional Reform and Governance Act. In India, cabinet approval is generally sufficient for ratification, unless legislative changes are required.
Carbon tax deferred
Meanwhile, in a move that could ease trade tensions, the UK has deferred the implementation of its proposed carbon border adjustment mechanism (CBAM), popularly known as carbon tax, the first official cited above said. India had earlier raised strong objections to any unilateral carbon taxation by the UK, asserting its right to impose retaliatory trade measures if such a tax were to be implemented.
“We have made it clear that if the UK goes ahead with a carbon tax, India will respond in kind,” said the official, who was part of the negotiations.
The two sides have also agreed that if a company pays a carbon tax in India, it may be exempted from paying a similar levy in Europe. This framework is likely to be part of a broader mutual understanding on climate-related trade rules, and officials indicated that the carbon tax issue with the UK may be set aside for now.
Export promotion councils across sectors have welcomed the deal, calling it a landmark pact that opens new doors for Indian businesses. They expressed readiness to explore the UK market more aggressively and tap into its potential. The government expects the agreement to create more than three times the current level of employment generated by UK-related exports over the next five years.
The India-UK FTA is one of the most comprehensive trade pacts India has signed in recent years, covering goods, services, investments, and sustainability issues. A total of 26 chapters have been negotiated since January 2022. The 14th and final round of negotiations began in January 2024. The finalization of the deal was announced on 6 May after the Prime Ministers of both countries held a concluding round of talks.
