With less than a month before the dates for the general elections are expected to be announced and the Model Code of Conduct (MCC) kicks in, the UK is still pushing for a greater opening up of the India economy under the free trade agreement (FTA) being negotiated.
The signing of the deal is unlikely before the elections as MCC is seen as a cut off for the announcement of the deal. Further delay could add to the complications for the FTA as the UK is also headed into elections later this year. However, negotiations to iron out the remaining points of contention are in full swing, with the Prime Minister’s Office (PMO) reviewing the progress of the FTA on February 16. Commerce and Industry Minister Piyush Goyal and Commerce Secretary Sunil Barthwal were also present in the review meeting.
“The deal can be signed in the next three weeks. There are economic and political ambitions on both sides. India needs to open up more as it is a high tariff country and the UK already is very open. We are not in a hurry because ultimately the deal has to accrue benefits for both the economies,” a UK government official told The Indian Express on condition of anonymity.
India’s tariff regime has been a concern for trade partners as New Delhi has one of the highest import tax rates in the world. While the average tariff on goods imported from India into the UK is 4.2 per cent, the average tariff in India on goods imported from the UK is 14.6 per cent.
While the UK has asked India to reduce the duty on cars and whisky among other items, India has sought better access for its service sector workforce in the UK. Negotiations on cars and whisky have been contentious as the Indian industry has been seeking greater access into the UK market.
Indian whisky manufacturers have said the UK should ease its three year maturation rule, which acts as a barrier, and New Delhi is also seeking duty concessions in the auto sector, particularly in the EV segment.
The FTA with the UK would be the first full fledged deal with a western country that would see deeper economic integration with a major global service sector leader. It is also seen as crucial since it will serve as a template for trade deals with larger western trade partners such as the European Union and European Free Trade Association (EFTA).
Economic integration with the western countries through FTA assumes significance as the global supply chain is undergoing a reset after Covid-19 and multinational companies globally are adopting a China plus one policy. Multilateral trade agreements such as the Indo-Pacific Economic Framework for Prosperity (IPEF) are also being negotiated in a bid to shift away from dependence on China.
So far 13 rounds of talks have been completed and the 14th round started on January 10.
Some of the key issues involved in the pact include customs duty cut on electric vehicles and whiskey and the movement of professionals. Talks are also progressing on the proposed bilateral investment treaty (BIT).
The India-UK FTA was originally slated to be signed by the Diwali of 2022.
The bilateral trade between India and the UK increased to $20.36 billion in 2022-23 from $17.5 billion in 2021-22.
(With PTI inputs)
