New Delhi: India and the UK are expected to take the first step towards a comprehensive free trade agreement (FTA) by signing a Memorandum of Understanding (MoU) for a smaller trade deal, known as ‘early harvest’, during British Prime Minister Boris Johnson’s visit later this month.
Johnson has been invited by Modi to be the chief guest at the Republic Day celebrations.
Now that the UK has finalised and signed a trade deal with the European Union (EU), thereby exiting the union’s single-market access completely, London is expected to increase pressure on New Delhi for an FTA, sources told ThePrint.
The UK has already signed a comprehensive FTA with Japan in October 2020, and talks are already going on for a similar trade pact with the US, Australia and New Zealand.
According to sources, the Ministry of Commerce and Industry has held discussions with the Ministry of External Affairs in the run-up to the first ever bilateral meeting between Prime Minister Narendra Modi and his British counterpart, which is expected to be held later this month.
Discussions for an India-UK FTA have been going on regularly between Commerce and Industry Minister Piyush Goyal and International Trade Secretary of the UK, Liz Truss.
However, India has refrained from officially launching talks since it was already negotiating a similar pact with the EU, which has been stuck since 2014.
India was also awaiting clarity on the final terms of the Brexit trade deal that the UK signed with the EU after negotiations.
“India needs to now analyse and do its homework more deeply as to what all it can sell in the UK otherwise there is no meaning for an FTA between both sides. Trade agreements are all about tariff reduction and that’s already there in the UK. So, we need to now explore newer and more innovative sectors to do business with the UK,” said Jaimini Bhagwati, former Indian High Commissioner to the UK.
Services trade main focus for India
According to sources, India is more keen on enhancing services trade between both countries that will lead to freer movements of professionals.
“We are looking at possibilities of trade in goods and services and investments being a part of our enhanced trade partnership with UK. We are looking at an option to see if it can be converted into an early harvest agreement,” Goyal said at an industry event last month.
India and the UK are also believed to have identified sectors such as pharma, food products, defence manufacturing, fin-tech and engineering goods, among others, for an enhanced two-way trade.
“India should ensure that it should gain more rather than giving more when it discusses the trade deal with UK. Compared to the deal with the EU, this will be easier because the UK will not put much focus on issues such as environment and labour laws that Brussels was insistent on. A liberal banking system in the UK will also help,” said Biswajit Dhar, trade expert and economics professor at Jawaharlal Nehru University.
“India has to get a deal done with the UK because it was following all this while the existing market access structure of the EU, which will now not be relevant for Britain.
India became the second-largest source of foreign direct investment (FDI) projects into the UK according to the latter’s Department for International Trade inward investment results, 2019 to 2020.
There are around 850 Indian companies in the UK with combined revenue of over £41 billion.
In December, UK’s Foreign Secretary Dominic Raab was on a three-day visit to India and on the proposed trade agreement between the UK and India, he had said: “The UK and India have an invaluable and indispensable partnership, and we look forward to strengthening it in the years ahead. Together, we can deliver an ‘Enhanced Trade Partnership’ next year, combine our cyber security expertise to protect our citizens, and join forces to protect global health and promote things like vaccine production.”