FTA India and UK

IASbaba

February 6, 2022

GS-2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Context: Recently, India and Britain launched trade talks in Delhi, with an aim to finalise a free trade agreement (FTA) as soon as possible.

What is an FTA?

An FTA is an agreement between two countries wherein it allows free flow of goods and services to and from both sides, removing all tariff barriers to boost trade with one another.

Recent development between UK and Australia

With autonomy brought to UK after Brexit, U.K. signed an FTA with Australia in December 2021, eliminating almost 99% of tariff on both sides, allowing free flow of goods between the two countries.
This will save nearly $10 billion for Australia in its exports of agricultural products to Britain and the U.K. will save several hundred million dollars in automobile, liquor and cosmetics exports.
The pact further helps Britain access the Pacific Rim, an 11-nation trade conglomerate including Australia called the Comprehensive and Progressive Trans-Pacific Partnership.

What does it mean for India?

Likewise, Brexit also paved the way for Britain to freely and comprehensively negotiate a new free mega trade deal with India.
The £1 billion investment and commercial trade deal India signed with Britain in May, 2021 creating 6,500 jobs in the U.K. was a kick-starter to this, opening a new chapter in commerce between them.
The free trade deal between India and the U.K. will bring in enormous changes not only in trade, but enhanced cooperation in agriculture, education and health sectors.
India’s traditional stakes are high in Britain as British Indian companies cumulatively turned over more than £85 billion in 2021 even amid the pandemic.
Also, India’s trade would see a quantum jump when the free trade pact is signed, from £23.3 billion when they inked an Enhanced Trade Deal last year to £50 billion post-FTA.
The British inward investment into the subcontinent was nearly £21 billion in the last two decades making Britain as the largest western investor in India, and this will also see a substantial increase.
With India set to becoming the world’s third largest economy by 2050, India not only becomes the U.K.’s most preferred partner, its 1.5 million diaspora in UK would get a shot in the arm when the FTA is signed.

What is India seeking from the U.K.?

While the talks are centred around removing all trade bottlenecks, and green trade, India is also seeking cooperation from Britain to reduce its carbon footprint by 45% while steadfastly promoting green energy.
With trade between India and the U.K. set to soar, there are substantial activities simultaneously taking place in other sectors, especially agriculture and education.
- The second Green Revolution, aimed at increasing food production in India to 400 million tonnes in the next 15 years, is led by plant ecology scientist from Cambridge University.
The TIGR2ESS, would strengthen alliance between Indian and British experts in social policy and science, hydrology and crop science based on the thesis of making modern agricultural practices reflect the needs of society acceptable to India today.
Both countries are also working for more cooperation in education, and possibly, India would allow more U.K. universities to open their branches in the subcontinent after the FTA.

Connecting the dots:

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