Trade deal seen dominating Theresa May's India visit

India's bilateral merchandise trade with UK currently rests at $14.02 bn, which is a 2.21% fall over previous year

The upcoming visit of the United Kingdom prime minister is seen as the UK's attempt to boost relations in a post-Brexit world. Its main aim would be trade deal. (Brexit is "British exit," which refers to the June 23 referendum whereby UK people voted to exit the European Union or EU. The referendum roiled global markets, including currencies, causing the British pound to fall to its lowest level in decades.)

On her first visit outside EU, prime minister Theresa May (pictured) is expected to push for a trade deal with major business partner India, which will be negotiated and signed as soon as the UK officially leaves EU. The three-day visit begins from Sunday.

India's merchandise trade with the UK currently stands at $14.02 billion, which is a 2.21 per cent fall over the previous year. The last time trade saw a positive growth was 2013-14, when it grew 6.16 per cent.

Under current rules, EU member-nations cannot negotiate trade deals on their own. While both nations have not stated their intentions to start negotiations, broad discussions on economic relations have already taken place.

These discussions include investment and merchandise trade, a commerce ministry official said on the condition of anonymity. Services trade, where both nations show significant strength, may emerge as an area of contention, he added. India is currently bogged down in negotiations regarding trade pacts on services trade, most notably the Regional Comprehensive Economic Partnership (RCEP) with Asean and its Free Trade Agreement (FTA) partners.

Asean is Association of Southeast Asian Nations.

The grounds for an FTA have been prepared over meetings between UK and India officials in July and August.

Then, both sides had decided to set up a joint working group to work out the details of "economic and commercial relationship which can be built and strengthened". Liam Fox, UK's global trade secretary, will visit India from Sunday to Tuesday to review the work of the group.

 

In trade, India's exports to the UK stand at $8.28 billion, a figure larger than the $5.19 billion worth of imports into India from the UK. The trade balance, in India's favour, is not as one-sided as that with other major developed nations like the United States (US). India exports $40 billion worth of goods to the US, and imports goods worth $21 billion from the US. Overall, the trade balance with the UK has remained in India's favour over the past five years, going up to $4.30 billion in 2014-15, then coming down last year to $3.63 billion.

India's main exports include apparel, over $905 of which were exported in 2015-16. Garment manufacturers and exporters are hopeful of consolidating their presence in the UK after the last decade saw Bangladesh and Vietnam slowly capture the EU market, experts pointed out.

The area of investment will also be important to the talks as India is currently the third-largest investor in the UK, behind the US and France. It also emerged as the third-largest job creator in the UK in 2014-15, with about 110,000 people currently employed by Indian firms.

On the other hand, the UK is also the source of the third-highest amount of investment into India, with eight per cent of the total inflow into the country between 2000 and March 2016.