NEGOTIATIONS for India-UK Free Trade Agreement (FTA) are the main focus of ties between the two countries at present, with several “hard bits” that could need intervention at a “senior level”. British High Commissioner to India Alex Ellis underlined this ahead of External Affairs Minister S Jaishankar’s visit to London. He indicated that British Prime Minister Rishi Sunak is “keen” to visit India, but that the focus on the FTA talks came first.
In January 2022, India and UK had decided to put the negotiations for a comprehensive FTA on fast-track mode. But the signing of the agreement, originally slated for Diwali last year, missed this year’s festival too. While the talks have gathered momentum – 21 out of 26 chapters have been finalised and negotiations are happening in weekly rounds – there is an urgency to wrap up the deal. India heads for elections early next year, while general elections in the UK will take place latest by January 2025. Both sides want to wrap the agreement as soon as possible.
The India-UK FTA marks a new era in India’s trade deals. It shifts the focus from East to West, opening doors to negotiations with Western nations like the UK, EU, Israel, Switzerland, and the US. Moreover, it includes non-trade issues like environment, labour, intellectual property rights, digital trade, Government procurement, competition and gender issues and creating opportunities and challenges.
Indian products like petroleum, medicines, diamonds, machine parts, aeroplanes, and wooden furniture worth $6 billion, face no tariffs in the UK, even without the FTA. These will not gain from the FTA. Exports valued at $5 billion, such as textiles, apparel (shirts, trousers, women’s dresses, bed linen), footwear, carpets, cars, marine products, grapes, and mangoes, face relatively low to moderate tariffs in the UK. As an example, tariffs on yarn and fabric are 4 pc, while tariffs on shirts, trousers, women’s dresses and bed linen range from 10 to 2 per cent. These products will benefit from the tariff reductions by the UK.
But signing an FTA alone may not substantially increase India’s labourintensive goods exports. For instance, India’s textiles and apparel exports to Japan did not see major gains from the FTA. Significant export growth requires improvements in product quality. On the other hand, UK exports of $8.2 billion, covering 91 per cent value of total merchandise imports from the UK, enter India on payment of average to high tariffs duties. These products will gain from tariff reduction by India.
India has hesitated to reduce tariffs in FTAs due to concerns about farmer welfare, making it a politically sensitive issue. However, selective imports will encourage Indian firms to improve their systems and offer healthier choices to consumers without negatively impacting farmers.
An area of immediate advantage for India is persuading the UK to issue priority visas to Indian professionals travelling to the UK to perform short-term assignments. This may not be easy, as the UK erroneously associates visas with immigration, a sensitive issue since Brexit. As negotiators resolve pending issues, the India-UK FTA presents a mixed picture of potential gains and complex challenges. The path to an agreement requires a delicate balance of economic interests, political sensitivities, and a commitment to improving the quality of Indian goods.
