A Labour government in London could give a shot in the arm to the negotiations on India-UK free trade agreement (FTA), given that a hastening of economic recovery would be the new dispensation’s top priority, analysts said. They cited that one of the electoral promises of the incoming prime minister Keir Starmer was to forge a “new strategic partnership”with the world’s fastest-growing major economy, which would include the FTA, and building stronger ties with the Indian diaspora.
“The UK has been facing economic headwinds since the pandemic, and with political stability, the economic recovery will be hastened. For an economy that is dependent on global markets, getting into strategic partnership with the rest of the world will be important, noted trade expert Biswajit Dhar said. “The Labour Party has come back to power on a mandate for change and how they proceed will have to be watched. I expect both sides (India and the UK) to be equally committed to get the FTA deal done,” Dhar said. “Political stability will allow the UK to go forward on the FTA in a surefooted manner,” he added.
During the poll campaign, Starmer had also talked about deepening cooperation with India in areas like “security, education, technology and climate change.”
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According to Ajay Srivastava, co-founder of Global Trade Research Initiative, India must seek clarity on how the Carbon Border Adjustment Mechanism (CBAM) will impact its exports. “Without this, the benefits of tariff reductions could be negated by the imposition of high carbon taxes,” he noted. Issues of labour standards and gender that have been kept out of the FTA but India will still need to be cautious on these non-traditional subjects, he noted.
“India must negotiate firmly on these issues to ensure that the market access gained through tariff elimination is not undermined by other barriers,” Srivastava said.
As such the India-UK FTA is nearly finalised. Analysts feel that after some minor tweaking of the number of visas for India professionals, the deal may well go through.
“FTA with India offers a significant price advantage to UK exporters, potentially boosting their exports to India almost immediately. For proof, it can look at the historical precedents, such as the steady improvement in Asean, Japanese, and South Korean exports to India following their respective FTAs with India,” Srivastava said.
The discussions on majority of contentious issues under the FTA have been completed and only few remain. These include “high duties” on whiskey and automobiles imposed by India. Every party has its policies and in the next few days there will be more clarity, partner at INDUALAW Shashi Mathews said.
The issues that may crop up at this stage can be worked around as both sides need this FTA to go through, partner at Economic Laws Practice Sanjay Notani said.
FTA negotiations between India and the UK started in January 2022. The proposed agreement has 26 chapters or policy areas dealing with other subjects like Intellectual Property, Government Procurement, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Competition, Rules of Origin, Trade Facilitation, Customs Cooperation, Small and Medium-Sized Enterprises, Trade and Sustainable Development, Labour, Gender, Digital Trade, Dispute Settlement, General Provisions and Transparency. So far India and Uk have held 13 rounds of negotiations on the FTA and the 14th round which started in January is in progress.
UK is India’s 16th largest trading partner with a total goods exchange of $ 21.3 billion dollars in the last financial year. India’s exports to the UK grew 13.3% to $ 12.9 billion while imports fell 6% to $ 8.4 billion. Smartphones and aviation turbine fuel was the biggest item of export to the UK. Services exports to the UK in 2023 were $ 17.2 billion while imports were $ 12.4 billion.
Along with the FTA, India and the UK are also negotiating a Bilateral Investment Treaty. UK is the sixth largest investor in India between April 2000 and March 2024. Its share in total FDI during the period was 5.17% of the total of $ 35 billion. For Indian investors the UK is the fifth biggest destination. Between 2000 and 2024 outbound FDI from India to the UK stood at $ 19 billion.
From: financialexpress
Financial News
