India and UK to start free trade agreement talks in new year

Data, fintech and IT are the buzzwords doing the rounds

India and the UK are set to embark on negotiations for a Free Trade Agreement (FTA) imminently. A spokesperson for the British government's Department for International Trade (DIT) told Business Standard: “We look forward to launching negotiations early next year”. “India is projected to become the world’s third largest economy by 2050, and a trade deal will open huge opportunities for UK businesses to trade with India's $2.25 trillion economy.”

The negotiations will aim to expeditiously arrive at a services rather than a goods-driven FTA between the two countries by early 2024 or before the general elections in the two countries, scheduled for the spring of that year. "Data, Fintech and Information Technology" are the buzzwords doing the rounds.

Further information from a source at the DIT indicated: “Preparations for the launch of negotiations for the UK-India FTA remain underway. DIT officials have been working closely with Government of India counterparts across a wide range of topics in the run-up to launch”. The source added, “The UK wants a deal that slashes barriers to doing business and trading with India's 1.4 billion population, making it a crucial short and long term trading partner for the UK”.

Alongside the launch of negotiations, the UK government intends to publish a public document outlining the strategic case, approach, a summary of consultation responses and a scoping assessment, which will detail economic analysis related to the FTA.

A close observer of the process in business circles stated, “(there is) a meeting of political minds”; in other words, both Boris Johnson and Narendra Modi are behind the move. This could mean flexibility where otherwise, if left to bureaucrats, there would be rigidity in respective positions.

The spanner in the works, though, are the doubts that have recently arisen over the longevity of Johnson’s premiership and whether Modi will be able to carry his Bharatiya Janata Party with him without murmur on any concessions he might need to make.

An upbeat UK India Business Council (UKIBC) posted on its website, “We believe it (a FTA) is both the right ambition and is eminently achievable”. The UKIBC, however, underlined, “An open dialogue between business and Government will be critical to successful FTA negotiations”. The UKIBC, in partnership with the DIT, has already held 18 pre-FTA consultation roundtables with businesses as part of consultation and gathering intelligence. Anne-Marie Trevelyan, the new British secretary of state for International Trade, met Commerce Minister Piyush Goyal at the G20 trade ministers’ meeting in Sorrento, Italy, in October. The DIT disclosed that at this conversation they had touched on “final preparations for the launch of UK-India FTA negotiations”.  The DIT described Trevelyan as “determined and enthusiastic” about getting an FTA done.   

FTA negotiations are generally long and tortuous. India and the European Union, for example, have been grappling with the issue for 14 years without a positive outcome; and until a year ago, the UK was a party in such talks. The desire on both sides to reach a deal by early 2024 emanates from the fear that a multi-government involvement on either side could derail matters.  The DIT, on the one hand, and the Ministry of Commerce and Industry of the Indian government, on the other, are expected to issue their respective mandates, which will form the basis of negotiations for the two sides. The mandates will set out priorities and red lines.

In the foreseeable future, negotiations will be held virtually. Discussion is underway as to whether the FTA should be phased in or proclaimed all in one go. Goyal is reportedly keen on “a limited early harvest agreement by March 2022”.

At a virtual summit on May 4 last year, Johnson and Modi unveiled what they called a “transformational” Comprehensive Strategic Partnership, with the signing of a UK-India Enhanced Trade Partnership. This committed the two nations to double trade — which in the last financial year was at around £20 billion — by 2030. Covid-19, though, has impaired progress on this front.