Election Gains, Trade Pains: The Surprising Tax Tussle Gripping India’s New Era

Image Source: Mint

Only days after India's sweeping election reforms boosted investor confidence, the highly awaited India-UK trade agreement has been plunged into controversy, shadowed by intense tax battles and political bickering in both nations.

Important Points:

Landmark Agreement Signed: India and the UK signed a trade agreement reducing tariffs on 90% of UK exports (most notably whisky and automobiles) and reducing duties on Indian food products, textiles, and apparel. The agreement is expected to boost the UK economy by £4.8 billion by 2040 and double bilateral trade to £25.5 billion a year.
National Insurance Exemption Generates Anger: The agreement has a "double contribution convention," which exempts Indian professionals temporarily in the UK-and vice versa-from paying National Insurance for three years. Though meant to increase business mobility, British opposition parties have labelled it a "two-tier" tax regime, cautioning it could undercut British workers and place a burden on taxpayers.
Carbon Tax Conflict: The agreement's sheen faded again as India sounded an alarm over the UK's impending carbon border tax (CBAM), which may target Indian steel, aluminium, and ceramic exports. India has pressed for a "rebalancing mechanism" to offset likely losses, contending the levy flouts climate justice principles and may offset gains through tariffs.
Political Fallout: Labour MPs in the UK's "Red Wall" branded the NI exemption "brain dead," with Conservatives and Reform leaders blaming the government for betraying British workers. Indian officials welcomed the deal as a "historic milestone" but remain suspicious of unseen barriers.

What's Next: While both sides rush to fix the carbon tax standoff and market the deal to doubting voters, the fate of this "landmark" agreement hangs in the balance-its promise of growth tainted with domestic tumult and global protectionist headwinds.

Sources: ITV News, Indian Express, BBC, PoliticsHome