Early general elections in UK may further delay FTA deal with India

The early election announced by British Prime Minister Rishi Sunak is expected to delay the free-trade agreement (FTA) between the UK and India, officials on both sides indicated.   

Sunak sprang a surprise on Wednesday by advancing the election to July 4, well ahead of the January deadline. India was expecting to sign the trade deal in July after a new government is in place in New Delhi following the ongoing general elections. However, a new regime, as is being anticipated, in London could prolong the trade deal.   

The Conservatives, led by Sunak, have been trailing the Labour Party, led by Keir Starmer, by around 20 percentage points in opinion polls. 

Sunak is hoping to turn around the Conservatives’ dismal polling numbers with the message that the economy is on the mend after the latest data showed the inflation rate there dropped to 2.3 per cent in April.

David Henig, director of the UK Trade Policy Project at the European Centre for International Political Economy, said in public the Labour Party had been supportive of a UK-India trade deal.

“It would be reasonable to expect the new government to review the progress of all negotiations against their own objectives, and this is likely to be true for India as for any other. They will want to ensure that any early deals concluded are of clear benefit to the country, and from what we hear about the progress of negotiations this is not yet definitely the case,” Henig, who has been discussing trade-policy issues such as the India-UK free-trade agreement (FTA) with the Labour Party team over recent months, said.

An Indian government official said this would delay the deal.

Launched in January 2022, the deal was scheduled to be concluded by Diwali (October) the same year but was delayed with the resignation of Boris Johnson as Prime Minister. While both sides have made substantial progress under Sunak, issues such as a bilateral investment treaty, bilateral social security agreement and India’s demand for a resolution to the carbon border tax by the UK are yet to be fully resolved.

Jayant Krishna, former group chief executive officer, UK-India Business Council (UKIBC), said the deal, which was at an advanced stage of negotiation, would be delayed by several months because the UK government did not have the mandate to make big announcements during the runup to the election.

“With the impending dissolution of Parliament, the FTA’s fructification may have to wait since successive Labour governments’ relations with India have been unpredictable,” he added.

Ajay Srivastava, founder of New-Delhi-based Global Trade Research Initiative, said an FTA with a high-tariff country like India would result in immediate market access for UK products.

“It makes sense to do this FTA irrespective of which party comes to power there,” he added.