India and the UK are progressing significantly in their free trade agreement negotiations. Just last month, the 11th round of discussions wrapped up. India’s Commerce and Industry Minister, Piyush Goyal, and Commerce Secretary, Sunil Barthwal, made a trip to London for that round. Their mission? To get a handle on how things were progressing in the negotiations. So, in this free trade agreement, there are 26 chapters. Now, here’s the interesting bit they’ve managed to wrap up discussions on 19 of those chapters.
But what does this agreement mean for India and UK? Well, there is a possibility that India could become the third largest economy by 2050, and this agreement between the two countries can boost UK’s trade by up to €28 billion a year and increase their GDP by £3.3 billion by 2035. This pact also extends advantages to India in terms of becoming the third-largest exporter of services to the UK. Not to mention, it will also be a booster for both countries’ drugs and pharmaceutical companies and IT services.
Now, before we steer our wheel towards the implications of this agreement, let’s understand the meaning of an FTA.
What is a free trade agreement?
To explain the concept in simple terms, an FTA or Free Trade Agreement is an official pact between two or more countries aimed to improve trade between them by reducing the barriers to exports and imports. This pact allows them to exchange goods and services across international borders with little to no government prohibitions, quotas, subsidies etc.
Since the agreement reduces the prohibitions, businesses across the countries involved in the pact can focus on producing and selling the goods that best use their resources. Additionally, other businesses can aim to import scarce or domestically unavailable goods. This healthy cooperation allows economies to grow faster and creates opportunities for employment in its wake.
Now as India and the UK join hands in a free trade agreement, it can be seen as fostering a symbiotic relationship. Also, it may interest you that this will be India’s first FTA with a developed country after it signed the interim trade pact with Australia last year.
For New Delhi, an FTA with Britain is vital to its aspirations of expanding jobs, exports and also a chance to share its qualified workforce with the UK’s IT and healthcare industries. On the other hand, the UK would gain broader entry for its premium cars, whiskey, and legal services and lower import duties. The UK also aims to become a part of a diversified global trade relationship after Brexit.
Both countries have agreed on many terms; the only differences left to be cleared out are intellectual property rights, rules of origin and the investment treaty.
What’s in it for India and the UK?
The FTA between the countries is expected to benefit both countries greatly.
Here’s a stat – the investment scorecard reached a staggering USD 33.9 billion between April 2000 and March 2023. India is delivering ready-to-wear clothing, glitz, equipment, and even spices! While the UK is giving away its treasures, which include diamonds, metal scraps, and a lot of chemical magic. A fascinating trading tango.
The British government believes that the primary advantages of a trade agreement with India encompass increased opportunities for UK investment and services. It will reduce trade barriers between the countries by removing several prohibitions. It will support trade and innovation in this digital world and create more opportunities for small-scale and medium-scale businesses, creating more jobs.
Considering the standpoint of the Indian government, the free trade agreement could enhance the “Make in India” initiative and facilitate the advancement of agreements in sectors like healthcare, defence, technology, and other vital areas.
India and the UK are on the verge of creating a history that will benefit both countries. Although the deal hasn’t been signed yet, the probability of it being finalised by the end of this year is high. The benefits that accompany this treaty are massive and can lead to immense development in both countries.