UK and India locked in final stages of trade talks

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India and the UK are locked in the final stages of negotiating a free trade deal with both sides wrangling over key demands in London this week, according to people briefed on the talks.

The most intractable area of disagreement is over Delhi’s request to be exempted from the UK’s “carbon border tax”, starting in 2027, which would add costs to imports from Indian such as steel, two people with knowledge of the discussions said.

The UK is adamant the issue falls outside the parameters of bilateral free trade negotiations because of world trade rules that require all nations to be treated equally, meaning India cannot legally be exempted from the scheme.

Further sticking points centre on the pharmaceutical and auto sectors, according to one of the people briefed.

Five separate points were still to be agreed following talks between India’s commerce minister Piyush Goyal and the UK on Tuesday afternoon, although several major chapters were signed off, said one person close to the discussions.

“The final yards are always the hardest, but it’s moving at breakneck pace,” the person said.

The deal, which both sides say is nearing completion, would be the most significant trade agreement signed by the UK since leaving the EU in 2020.

One of Goyal’s officials said the negotiations “seemed positive”. Another senior commerce ministry official added that a deal was within “striking distance”, warning “the tail-end takes the longest”. 

The pact has been in gestation for more than three years of on-off negotiations that were restarted in February following US President Donald Trump’s return to the White House.

Goyal and UK business secretary Jonathan Reynolds met with UK business leaders in Downing Street on Tuesday, with both sides positive about the prospect of a deal but neither committing to a timeline.

“They said they had productive meetings and had made progress ‘but one or two issues remained on the table’,” said one executive who attended.

Goyal will now travel to Norway and on to Brussels, but officials said it was possible that he could return to London on Saturday when it was still hoped an agreement in principle could be reached.

Other areas of contention include whether Indian employees transferred to the UK should be exempt from national insurance contributions to avoid so-called “double taxation”, and the number of visas allocated to Indian professionals.

Delhi has accepted that Britain will only offer as few as 100 extra visas for Indian workers a year, according to the Politico website.

India opened trade talks with Britain in 2022 but the recent threat of a 26 per cent “reciprocal” US tariff on Indian goods has renewed impetus to conclude the long-delayed negotiations.

Starmer has also called for faster trade talks after the US imposed a 10 per cent levy on British imports. 

The negotiations were paused in March last year ahead of elections in both countries but relaunched in February, shortly after Trump’s inauguration.

Both governments have said that the resumption of talks came out of discussions between their respective prime ministers on the sidelines of the G20 summit in November in Rio de Janeiro.

Bilateral trade between India and Britain, the world’s fifth and sixth-largest economies respectively, hit £41bn ($54bn) in the 12 months to September 2024, according to UK government estimates, with India having a surplus.

The Department of Business and Trade said that with only a handful of issues remaining, it would not provide a running commentary on the final stages of the negotiation.