UK-India FTA negotiations launch: what the deal would mean for business

Why is an FTA with India important for the UK economy?

India is one of the world’s largest and fastest growing economies, set to become the world’s third biggest economy by 2050.  With a population of 1.38bn and a growing middle class, a trade deal would allow UK businesses access to a huge consumer base and has the potential to almost double UK exports to India. This would boost the UK’s total trade by as much as £28 billion a year by 2035 and increase wages across the UK by £3 billion.

How can the deal benefit UK businesses?

Businesses could see key barriers slashed, an ambition of the UK government. Removing duties alone would increase exports to India by up to £6.8 billion, supporting tens of thousands of jobs across the UK. Important UK exports like Scotch whisky and cars currently face significant duties of 150% and 125% respectively.

The UK’s world-leading renewables industry could also benefit from a deal that reduces barriers, with import tariffs as high as 15% on wind turbine parts from the UK being reduced – an exciting prospect given the Indian government plans to install 175 GW of renewable energy capacity by 2022 and much more in the coming decades.

A deal with India could also contribute significantly to the UK levelling up agenda. Almost 30,000 people in the West Midlands for example were employed via Indian investment in 2019, and the region could see a massive boost of up to £300m with opportunities for manufacturers of motor vehicles and parts.

What are the priorities and difficulties for the UK in the negotiations?

UK and India share a special and deep-rooted relationship. As negotiations begin, the UK should use this to its advantage by offering its trading partner a dynamic ecosystem of services and goods that can bolster bilateral economic growth.

For this to happen, it’s crucial that the UK, led by Harjinder Kang, Director for India Negotiations at the Department for International Trade (DIT), approaches this FTA with a view to enabling opportunities in areas where the UK has competitive advantage like services, life sciences, and tech and innovation.

This means prioritising:

1. safeguarding UK innovation and development through protecting its IP and instilling confidence back into UK businesses to trade more with India.
2. encouraging the free flow of data across borders with India and to ensure that localisation requirements do not hinder but enable UK businesses to deliver cutting edge services to its customers, ensure smooth delivery of operations and enable research and development.
3. creating further access to India for UK business visitors to operate effectively in the market, such as through gaining commitments to extend visitor period from 90 to 180 days like India has agreed with the ASEAN.

However, it’s worth noting this is a difficult FTA for the UK to negotiate. The UK should observe and learn from India’s negotiations track record. The UK is in active pursuit of FTAs, while India, by contrast, has been less inclined to sign preferential trade deals, not having signed any trade agreement for over 6 years.

If the UK is to deliver for its services sectors it must establish regulatory dialogues between agencies on both sides to minimise differences to conflict and achieve mutual recognition wherever possible. This will take time as India has a multi-layered and complex regulatory system. Nevertheless, India acknowledges the UK’s leadership in regulatory standards, and the UK should use its reputation to achieve alignment. India’s negotiations will be led by Ms. Nidhi Mani Tripathi, Joint Secretary, Department of Commerce.

Additionally, areas where UK businesses broadly have the most at stake such as IP protection, data localisation and mobility are all areas which are likely to be the most difficult and sensitive to negotiate with India. This is due to its India’s domestic policies and political positioning. With this in mind, we may see an early harvest deal that addresses areas where there are less divergent views.

What is the CBI’s role in negotiations and how can members get involved?

The CBI will be the catalyst among industry, partners, and government – bridging the gap through dialogue and consultation with members.

The first round of negotiations will commence on 17 January, and future rounds of negotiations will take place approximately every five weeks, each round spanning two weeks.

Following our successful pre-FTA consultation round with members in 2021, the CBI is planning activities aligning with DITs timeline to keep members updated and ensure there is opportunity to inform and influence negotiations. We are aiming to host a roundtable in the coming weeks with key officials as an opportunity for members to engage and influence directly with DIT on the most pressing issues in this FTA.

CBI is also exploring a more formal partnership with the Confederation of Indian Industry (CII), to bring UK and Indian businesses together for a cohesive and transparent industry view on priorities, free of political jargon from both sides. This will feed into CBI’s overall position and our future submissions to DIT.

The CBI will continuously update members as the negotiations progress. For more information, please contact [email protected] or [email protected].