India-UK Free Trade Agreement (FTA)
India and the UK signed a Free Trade Agreement (FTA), after over three years of negotiations. This agreement is significant due to swift negotiation completion and its potential impacts on both nations.
Background and Context
- The FTA negotiations started in January 2022, concluding relatively quickly compared to other trade discussions like those with the EU.
- Post-Brexit, the UK sought new trade partners, securing deals with Japan, Singapore, Vietnam, and joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
- The India-UK FTA ranks as the UK's most significant post-Brexit trade deal, given India's position as a fast-growing economy.
Key Features of the FTA
- India benefits from improved access for exports such as mineral fuels, machinery, pharmaceuticals, and textiles due to reduced or zero duty tariffs.
- The agreement facilitates mobility for Indian professionals and students, addressing UK’s aging demographic challenges.
- The FTA promotes voluntary trade, contrasting with past colonial exploitative models.
Economic Impact
- The India-UK bilateral trade reached approximately £42 billion by mid-2024, with a target to double by 2030.
- The UK is India’s sixth-largest investor, and India was the second-largest source of FDI in the UK in 2023.
Challenges and Future Prospects
- The FTA aims to align standards and enhance cooperation in e-commerce, digital trade, and climate change.
- India has so far resisted binding labour and environmental standards, opting for non-binding clauses.
- The agreement supports mutual recognition of professional qualifications and academic credentials, fostering educational and professional exchanges.
Conclusion and Outlook
India's engagement in the FTA underscores its commitment to integrating into global trade and value chains. The success of the FTA depends on accompanying domestic reforms to overcome structural challenges. The FTA could serve as an impetus for broader economic upgrades and reforms, similar to the role of global markets and the WTO in China's economic development.
