This Diwali was extra special for India. Joyous after defeating arch-rival Pakistan in the first match of the ICC Cricket T20 World Cup, India added yet another feather in its cap as Rishi Sunak was elected UK’s prime minister, replacing the humiliated Liz Truss. The 42-year-old Sunak, a Hindu, will be Britain’s first prime minister of colour and the youngest in more than two centuries.
As political leaders hailed Sunak’s rise to the top job, there were many to saw the change in regime as hope for the stalled India-UK trade deal which missed its Diwali deadline on Monday.
It was in January 2022 that India and UK formally launched talks for a free trade agreement (FTA) to boost bilateral trade and investments to $100 billion by 2030. In such pacts, two countries either eliminate or significantly reduce customs duties on the maximum number of goods traded between them, besides easing norms for promoting investments and services trade.
THE NUMBER GAME
According to official data, the bilateral trade in goods between India and the UK stood at $16 billion in 2021-22 as compared to $13.11 billion in 2020-21, a jump of 22.17%. Exports worth $9.43 billion were shipped in 2021-22, while imports worth $6.59 billion were received in the same year. This gives a trade balance of $2.84 billion in the financial year 2021-22.
The trade between the two countries had stood at $15.45 billion in 2019-20, $16.87 billion in 2018-19, and $14.49 billion in 2017-18.
In 2021, India was the UK’s 15th largest trading partner, and the UK is India’s 18th largest trading partner with manufacturing exports accounting for over 90% of India’s exports to the UK.
India’s main exports to the UK include ready-made garments and textiles, gems and jewellery, engineering goods, petroleum and petrochemical products, transport equipment and parts, spices, metal products, machinery and instruments, pharma and marine items.
Major imports include precious and semi-precious stones, ores and metal scraps, engineering goods, professional instruments, non-ferrous metals, chemicals and machinery. In the services sector, the UK is one of the largest markets in Europe for Indian IT services.
Apart from goods and services, India wants movement of skilled workers and data adequacy status, while the UK wants duty concessions for whiskey and scotch, imported automobiles, apples, pears, quinces, and lamb meat.
India also wants the resolution of regulatory issues in the pharmaceutical sector and duty concessions for textiles, footwear, leather products, basmati rice. The UK wants greater access to medical devices and legal, accounting and financial services.
Then British Prime Minister Boris Johnson and Indian counterpart Narendra Modi met in April where they set an ambitious target to sign the free trade agreement (FTA) by Diwali on October 24.
However, UK Trade Secretary Kemi Badenoch – who took charge under the Liz Truss government in September – recently confirmed that the negotiators were no longer working towards that timeline “to focus on the quality of the deal rather than the speed of the deal”.
THE BOTTLENECKS
The steep import duty on British whiskey for sale in India and India’s demand for more visas for Indian students and businesses remain the sore points in the negotiations.
To add to the mess, India did not take kindly to comments made by UK Home Secretary Suella Braverman questioning action over visa over-stayers from India.
Braverman, the now-sacked Indian-origin Home Secretary, said in an interview that she feared a trade deal with India would increase migration to the UK when Indians already represented the largest group of visa over-stayers. “… I do have some reservations. Look at migration in this country – the largest group of people who overstay are Indian migrants,” she told The Spectator magazine.
Apart from more visas, India wants to increase exports of leather, textiles, jewellery and food products to Britain, while Britain is keen to sell more whiskey to India and wants it to reduce an import duty of 150%.
Reuters reported earlier this month that Indian car makers had proposed cutting to 30% the tax rate on imported cars as part of the trade deal with Britain, from 60% to 100% now.
CAN RISHI RUSH DEAL?
In his previous contest that he lost to Truss, Sunak had said he wanted to be “pragmatic” in his approach to immigration and make sure his policies support economic growth.
In an exclusive interview with Times of India, the former chancellor had said he was “strongly committed” to the India-UK FTA to create jobs in both countries.
Sunak — the son-in-law of tycoon Narayan Murthy — had also said the city of London could help facilitate India’s growth by helping get capital to them and also that the UK could facilitate climate finance to fund India’s net zero ambitions.
Earlier this year, he said the way he reimagined the UK-India relationship was “a partnership of equals” where the brightest talent from both countries travel back and forth to study and work, one which includes a close trading partnership on goods and services, and where the UK and India freely exchange world-class ideas and innovation, TOI reported.
Sunak had also laid emphasis on the partnership at the India Global Forum UK-India awards when he said “UK does not have a natural right to sit at the table with one of the world’s largest, fastest growing, and most dynamic economies. We must earn it”.
Meanwhile, in India, Commerce and Industry Minister Piyush Goyal said the government would adopt a “wait and watch policy” on the deal.
“We will have to wait and see… what happens, whether they have a quick change of the leadership, whether it goes to the whole process… So let us see who comes into the government and what their views are. It’s only after that we will be able to formulate a strategy vis-a-vis the UK,” Goyal had said during a state of flux when Truss’ regime was facing danger.
He added that politicians and businesses across the board in the UK have recognised that the FTA with India is vital, while adding the agreement should be fair, equitable and balanced.
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