The India-United Kingdom Free Trade Agreement has been in the pipeline for a while, but what does it contain?
Closing a free trade agreement with India would be a major win for British Prime Minister Rishi Sunak in the early days of his prime ministership.
The United Kingdom (UK) has been grappling with a nationwide economic turmoil coupled with a political leadership crisis. With its third prime minister in the last two months, the UK is holding onto the renewed hope for a stable socio-economic and political future.
For the new prime minister Rishi Sunak, clinching a major free trade agreement would a big win. UK Trade Department Minister Greg Hands has said that, "Britain has completed the majority of sections of a free trade agreement with India but will only sign off on the deal once happy that it is fair and reciprocal." This landmark India-UK Free Trade Agreement (FTA) would improve the economic cooperation and diplomatic links between the two countries and has been in the works since the government of Boris Johnson. Due to the consistent political crises in the UK, in terms of the changing governing leadership as well as the demise of the long standing monarch Queen Elizabeth II, the trade deal took a back seat.
Now with Rishi Sunak in office, hope for an early conclusion of this deal has risen again. Therefore, it is first important to understand what the deal would mean for both the countries and what areas of cooperation would be improved upon once it comes into force.
The negotiations for a Free Trade Agreement (FTA) between the UK and India have been a part of the Enhanced Trade Partnership which both the countries entered into in 2021. This Enhanced Trade Partnership involved an investment package of around 533 million pounds ($616 million) in the form of Indian investments in the UK and about 446 million pounds ($515 million) through British exports to India.
Both these agreements were the outcome of the larger Roadmap 2030 which aimed towards building sustainable cooperation into diverse policy areas among both the countries. Hopes for a trade agreement were rekindled when Indian Prime Minister Narendra Modi congratulated Rishi Sunak for assuming office while taking attention to the Roadmap 2030. “Warmest congratulations Rishi Sunak! As you become UK PM, I look forward to working closely together on global issues, and implementing Roadmap 2030. Special Diwali wishes to the 'living bridge' of UK Indians, as we transform our historic ties into a modern partnership,” Modi tweeted.
With the UK economy in turmoil, gaining access to the Indian market would improve the local industries in the county and also boost the manufacturing systems altogether. The major industries where the UK could gain an Indian market would be through transport equipment, medical devices, chemicals as well as British wines, scotch whisky, fruits and vegetables.
India, on the other hand can explore to enhance the tariff-free exports of agricultural produce such as rice as well as pharmaceuticals and Indian textiles. Another major area of exploration for India could be the export of its refined petroleum products to the UK. This is especially relevant in the context of the energy crises instigated by the war in Ukraine and it could be specifically beneficial for the growth of the budding refined petroleum sector in India.
It has to be noted that the mutual recognition of economic cooperation opportunities between both the countries has influenced the trade patterns over the last one year. As per the recently released fact sheet of the Department of International Trade of the UK, total exports from UK to India showed an increase of 21.3 per cent from 2021 to 2022. The numbers after the first quarter of 2022 amounted to about 8.8 billion pounds ($10.1 billion). Indian exports to India, on the other hand, amounted to 16.9 billion pounds ($19.5 billion) at the end of the first quarter of 2022. This makes for about a 43.9 per cent rise from the first quarter of 2021. These figures throw light on the rising economic engagement between the two countries.
The final Free Trade Agreement (FTA) between India and the UK would also deal with the investor protection clause which aims at improving investment practices along both the sides. As the UK companies are encouraged to raise finances in the Indian market and the Indian business are also aiming to increasingly invest in the British manufacturing sector, it is very important for the trade deal to specify the provisions for the protection of the investors across various sectors.
Apart from the economic and investment aspects, one of the most important aspects of this deal would be that it would open doors for enhanced migration policies. Over the past few months, many hurdles have brought about a halt in the trade deal negotiations and one of those was the comment of Suella Braverman - the home secretary under the Liz Truss government over the Indian migrant population in the UK. While the comments did not sit well with the Indian administration as well, there is still a ray of hope over pragmatic policies on the migrant and cultural exchange between the countries. The reappointment of Suella Braverman as the home secretary by Rishi Sunak however, has raised some eyebrows regarding the contentious issue. As the demands of relaxed visa restrictions by the Indian migrant and student population in the UK has been increasing, and mobility of labour is a critical Indian demand, this issue might remain thorny between the two countries negotiating the deal.
India is one of the most significant exporters when it comes to the service sector. This element could very well play into the upcoming FTA. As per the International Trade Briefing, the telecommunications, information-technology, transportation, travel and finance make the major service exports from India to the UK. Information technology made up to 913 million pounds (around $1 billion) in service exports over the first quarter of 2022, while the financial sector contributed to about 111 million pounds ($128 million) in service exports. The FTA could potentially boost up the service trade practices even further.
Another major area of cooperation between both the countries could be the interaction between the higher education institutions on both sides. This does not just pertain to the movement of students but also to the movement of academic professionals on both sides. In this regard, it is important to note that there has been a memorandum of understanding over the mutual recognition of the academic qualifications between the governments of India and the UK. Once this comes to fruition, there could be more engagement on academic lines as well as intellectual property between the countries. The memorandum of understanding on maritime education is also important in this regard as it would facilitate the training and competency building in maritime education by both the governments.
The next most important aspect of the trade deal is the healthcare sector. India is one of the leading names in the pharmaceutical industry and opening up avenues for healthcare equipment can improve upon the healthcare infrastructure among the countries. Likewise, the UK can also contribute towards the exports of new age state-of-the-art medical equipment to India while also cooperating on the medical capacity building through better workforce engagement on both sides.
The FTA in the making could be one of the most comprehensive agreements between the two countries that covers economic, financial, academic as well as cultural aspects of cooperation between India and the United Kingdom. The British parliament has also developed an India All Party Parliamentary Group (IAPPG) for cooperation on trade and investment. With Rishi Sunak in office, there is increased enthusiasm over the deal but it is yet unclear when the deal could be finalised and signed.
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