Britain and India announced a "landmark" trade deal on Tuesday, which included offering New Delhi a favorable entry to the UK job market in exchange for significant Indian tariffs on whiskey and car exports.
The deal will waive Indian employers’ UK operations to move to the UK for up to three years, making people cheaper than before.
When tariffs from U.S. President Donald Trump angered the world economy, the Labor government called the deal "a bright light."
But just a few days after the British Anti-Immigration Reform Party swept over the UK's local elections, it faced domestic criticism.
Reform leader Nigel Farage claimed that British Prime Minister Sir Keir Starmer "betrayed British work".
India will work hard during the three-year "Double Contribution Convention" negotiations that will allow British Indian employers to remedy from the 15% national insurance tax in the UK. The deal to avoid double taxation also covers state insurance contributions paid by employees.
New Delhi has agreed to cut whiskey and gin tariffs, which will be reduced from 150% to 75% before dropping to 40% in the tenth year of the deal. With quotas, the car tariffs will be reduced from above 100% to 10%.
Negotiations on the deal have accelerated after Trump imposed global tariffs last month, with London and New Delhi keen on blocking closer trade relations.
Prime Minister Narendra Modi posted the deal on X that was "ambitious and mutually beneficial", adding that Starmer will visit India soon.
British ministers hope the India trade deal could be the prelude to a deal with Trump in the coming days, starting to improve bilateral trade ties at the summit on May 19 before reaching a deal with the EU.
The UK government estimates that India's deal will boost the UK's economy by 0.1% by 2040. Officials insist that this would not involve changes to the UK visa system or the broader immigration strategy at a time when reform and the Conservatives are running on the issue.
British officials say Indian employees relocating to the UK will still sign a salary threshold for visas, and despite exemption from national insurance, NHS surcharges must be paid to migrant workers.
The deal comes after Prime Minister Rachel Reeves raised national insurance donations for employers on his first budget in October.
Conservative Party’s shadow business and trade minister Dame Harriett Baldwin said in parliament the deal “looks like subsidizing Indian Labor Party while weakening British workers.”
The centrist Liberal Democrats also questioned the National Insurance Agreement, saying the move requires careful scrutiny of members of Congress.
Trade Minister Douglas Alexander told MPs that the national insurance part of the trade deal is "reciprocal" and that "will benefit British workers and their employers as opportunities expand in India."
The UK government said the National Insurance Agreement is similar to arrangements with countries such as Switzerland, Norway and Canada. Indian employers are the largest user of the company's internal transfer of visas to the UK.
The UK government said cutting tariffs on Indian products would help provide British shoppers with "cheaper prices and more options" including foods such as clothing, footwear and shrimp.
India will maintain tariffs on dairy products, while the UK will maintain restrictions on certain agricultural products, such as rice.
Although full details have not been provided, the trade agreement is expected to be one of the most important new agreements signed by the UK, under Australia and Japan.
The UK government said that under 2022 trade, the deal would involve the reduction of tariffs worth more than £400 million a year when the agreement came into effect, rising to £900 million in 10 years.
It added that the deal would increase bilateral trade by £25.5 billion in the long run and UK GDP by £4.8 billion. Bilateral trade between the UK and India was £42.6 billion in 2024, while trade in the UK's GDP was £2.851 billion.
The announcement said the deal would provide "market certainty" for UK service exports, currently worth £50 billion per year. However, the Law Society of England and Wales said the deal failed to include legal services and was a "missed opportunity".
Sam Lowe, head of trade at consulting firm Flint Global, said one of the first countries to reach a trade agreement with India was the victory of the UK, but the final gains will only become clear over time.
Other reports by Amy Borrett