UK-India defence deal runs parallel to FTA talks, includes work on jet tech

Following British Prime Minister Boris Johnson’s visit to India, India and the UK will further enhance their cooperation in the defence sector. This will entail collaboration ‘on new fighter jet technology, helicopters, and in the undersea battlespace’.

Fighter jets and helicopters are ongoing indigenous programmes which will be embellished by British know-how, design, and components. These have been happening in the development of the Tejas Mark 2 light combat aircraft — the new version of which is fitted with UK-made Rolls-Royce engines. The Tejas demonstrated its capability in a multi-nation air exercise in England last month.

Johnson was enthusiastic about opening a new India-specific open general export licence for British export of equipment and emerging technologies to India. However, a report published by the Royal United Services Institute (RUSI), a London-based think tank, warned about the potentially disruptive nature of smuggling Indian defence technology into Russia.

Rahul Roy-Chaudhury, senior fellow at the International Institute for Strategic Studies in London, reacted: “The RUSI report appears more speculative than substantive in reference to India.”

Johnson has, meanwhile, assured doubters he would ‘plug loopholes’.  

After Johnson’s trip, the British High Commission in Delhi hosted a round-table on forging a strategic defence partnership in tune with the Atmanirbhar Bharat policy of the Narendra Modi government, which the British industry flagged in the past as ‘protectionist’ and therefore, a ‘hurdle’. Nevertheless, this meeting reportedly explored ‘new technologies through research and development collaboration, promoting supply-chain indigenisation’.      

Three rounds of negotiations for what is being called a free trade agreement — actually an interim or limited treaty — have now concluded. A representative of the UK India Business Council (UKIBC) wrote the last round was expected to “see areas of agreement that would result in trade and investment barriers falling, and the contours of a deal starting to take shape, at least in some areas”.

Johnson declared in Delhi that an accord would be ready by Diwali. The executive chair of UKIBC Richard Heald told the BBC: “Obviously, that’s going to be challenging.”

Sources close to Johnson hinted at an easing of immigration rules for Indians as a part of such a pact. The BBC highlighted that there had recently been a 164 per cent increase in student visas granted to Indians. To this, Heald replied: “There’s got to be a trade-off between both parties. If you’re going to have a trade deal, there’s got to be some degree of negotiation.”

In the higher education sphere, the University Grants Commission in India has approved regulations for dual, joint and twinning degree programmes with foreign universities. This could increase the flow of Indian students into the UK and boost Britain’s revenue from having more overseas students.

In the area of food and drink, the UK has long sought a tariff reduction by India, which stands at 150 per cent on Scotch whiskies. For duty cuts to take place on a reciprocal basis, Indian whisky makers will either have to meet the minimum British standard of three years of maturation or the UK will have to relax its requirement. Indian whiskies are generally matured for two years, which is equivalent to 6-10 years of maturation.  

Interestingly, a sector being discussed is sports betting. A UKIBC study projected that if Maharashtra was to legalise bookmaking, it could generate for itself a revenue of ~12,400 crore per annum. Britain possesses generations of expertise as far as gambling is concerned.

KPMG estimated there were 433 million online gamblers in India in 2021. This is projected to increase to 657 million by 2025.

A lack of central legislation and high rate of goods and services tax are an impediment to domestic growth. UKIBC recommends falling in line with international practice and taxing based on gross gambling revenue, which would help put the regulated industry on a more level playing field and help it to expand. It remains to be seen if Indian authorities break the shackles of morality to legalise betting. The Twenty20 Indian Premier League itself would generate a significant turnover.  

On data and digital trade, British observers say negotiations are proceeding on the lines of ‘an interoperable and harmonised data protection regime in order to facilitate the free flow of data and wider digital trade’ between the two countries.

The current Indian dispensation is said to be keen on this and Britain sees this as one of its strengths.