Sansad TV Perspective: India-UK FTA

In the series Sansad TV Perspective, we bring you an analysis of the discussion featured on the insightful programme ‘Perspective’ on Sansad TV, on various important topics affecting India and also the world. This analysis will help you immensely for the IAS exam, especially the mains exam, where a well-rounded understanding of topics is a prerequisite for writing answers that fetch good marks.

In this article, we feature the discussion on the topic: India-UK FTA

Anchor: Vishal Dahiya

Participants:

1. Dr. Rajan Sudesh Ratna, Deputy Head, United Nations ESCAP
2. Jitendra Nath Misra, Former Ambassador
3. Prof. Abhijit Das, Former Head, Centre for WTO Studies, IIFT

Highlights of the Discussion:

• Introduction
• Background-Key discussion negotiation points of FTA
• Various issues delaying the FTA
• Significance of the FTA
• Road Ahead

Context: India and UK had formally launched talks for a free trade agreement to boost bilateral trade and investments in January 2022.

Introduction:

• Britain’s Prime minister Liz Truss recently resigned as prime minister after being in office for just 44 days, making her the shortest-serving prime minister in British history.
  • The current government also saw several high-profile resignations in recent days including former Chancellor Kwasi Kwarteng, and Home Secretary Suella Braverman.
• These political developments have delayed the negotiations and signing off on the FTA  between India and the UK.
• The free-trade agreement discussions are likely to spill over to mid-next year as both nations are yet to iron out their differences over providing greater market access for certain goods and services.

Background:

• India-United Kingdom formally launched the negotiations for an free trade agreement (FTA) in the beginning of 2022 which both of them envisaged concluding by the end of 2022.
• The goal of these discussions was to obtain a “fair and balanced” FTA that would cover more than 90% of tariff lines and enable bilateral commerce to attain its target of around $100 billion by 2030.
• This “new-age FTA” has been expected to cover topics including intellectual property rights, geographical indications, sustainability, digital technology, and anti-corruption in addition to products, services, and investments.
  • There were discussions on transitions from fintech to green-tech and automation to Artificial Intelligence.
• A U.K.-India trade agreement will stimulate growth and employment in both countries and will help diversify supply chains by making it easier and cheaper for more businesses to do business across borders.
• This aims to double the bilateral trade by 2030 and it has been considered as a partnership that is built on shared history and rich culture.
• India expects to gain from tariff reduction in labour-intensive sectors such as textiles, leather, jewellery apart from cereals and pharmaceuticals.

Various Issues delaying the FTA:

• FTA negotiations earlier hit a snag over easier access to thousands of skilled workers from India.
  • India’s position has hardened in the ongoing negotiations amid concerns raised by UK Home Secretary Suella Braverman on migration from India. 
• India too is yet to agree to issues critical to the UK including lowering import duties on automobiles and Scotch whisky—one of Britain’s major demands
• The UK’s insistence on being exempted from data localization regulations that have an impact on industries like the financial services industry and better access to India’s government contracts are other issues preventing progress in the negotiations.
  • India has expressed its inability to relax the data localization rules due to domestic laws.

Significance of this FTA:

• After the Pandemic and Brexit, Britain has realised that it requires strong economic partnerships.
• The UK has a large Indian diaspora, estimated to be around 1.5 million strong. Also, the Indian diaspora has made valuable contributions in the areas of academia, literature, arts, medicine, science, sports, industry, business and politics, among others.
• Indian diaspora-owned companies with significant revenue income employ lakhs of people in the UK and pay a significant amount of Corporation Tax that has helped the UK a lot during the current economic situation post the Pandemic and Brexit.
• India is one of the biggest investors in the U.K. in dynamic sectors like fintech, electric vehicles and batteries. 
  • In 2020-21, India was the U.K.’s second-largest source of investment in terms of the number of projects.
  • The UK remained the sixth largest investor in India, with a cumulative investment of approximately USD 31.92 billion during FY 2000-22.
    • This constituted around 5.4% of the total Foreign Direct Investment (FDI) into India.
• There are nearly 600 U.K. companies in India employing more than 3,20,000 people.
• The U.K.’s Indo-Pacific “tilt,” which has attracted significant interest worldwide, centres around India.
  • The U.K. recognises the importance of a free and open Indo-Pacific to global stability and prosperity, and has made clear its intentions to deploy strategic assets to this end.
  • The UK will have a stronger voice in the Indo-Pacific area thanks to agreements like AUKUS and free trade agreements with nations like India.
• The UK is a permanent member of the UN Security Council, and one of the strategic partners of India.
• Strengthening bonds with the trade would seek UKs support at global issues like standoff with China and claim for permanent seat at UNSC.

Way Forward:

• India and the UK have engaged with each other at a time when the entire realm of geopolitics is residing amidst uncertainty.
  • Both the countries are firm on their stances and confront their shared anxieties about the autocratic coercion around the world with the common goal of achieving peace.
• India has an extraordinary opportunity to transform its economy and society in the next 30 years.
  • Freer trade with the U.K. will benefit India’s developing businesses by providing greater access to a highly open and competitive market. For instance, it will provide India’s start-ups direct access to U.K. ‘s capital markets.
  • Greater regulatory certainty and lower hurdles would encourage new small and medium-sized businesses to export their products and services.
• There are upteen rooms of collaboration in the field of technology, defence, academics, industries and so on that India can embolden its ties with the United Kingdom and take the friendship to the way of development, shared humanity, security and sustainability.

Read all the previous Sansad TV Perspective articles in the link.

Sansad TV Perspective: India-UK FTA:- Download PDF Here