India-UK Free Trade Agreement (FTA)
The Free Trade Agreement between India and the United Kingdom signifies a pivotal development in strengthening India's bilateral relations amidst a fragmented global trade landscape.
Key Benefits for India
- Export Advantages:
- 99% of India's exports to the U.K. will be duty-free.
- Engineering exports are projected to nearly double to $7.55 billion by 2029-30.
- Overall bilateral trade is expected to increase to $120 billion by 2030.
- Employment and Investment:
- Indian workers temporarily in the U.K. and their employers will be exempt from social security contributions for three years, easing hiring processes.
- The FTA facilitates the movement of professionals and investors, potentially boosting foreign direct investment (FDI).
Concessions from India
- India will reduce tariffs on 90% of imports from the U.K., with 85% moving to zero tariff within ten years.
- Import duties on whiskey and gin will be lowered, increasing competition and affecting premiumisation trends.
Challenges and Criticisms
- Historical FTA Issues:
- Previous FTAs, like with the UAE and Australia, have not always been advantageous for India.
- Concerns from Farmers:
- Reduced tariffs on lamb, salmon, and other edible products have raised alarms among Indian farmer organizations.
- Protection of low-income, low-margin Indian farmers is necessary.
Implications for Future Trade Agreements
- The India-U.K. FTA is expected to serve as a template for future deals with the EU and the U.S.
- India must exercise caution, given the larger trade significance of the EU and U.S.
- Indian manufacturing, contributing less than 2% to global exports, requires supportive measures amidst international trade negotiations.
