Finance
Since 2004, India and the United Kingdom have had a Strategic Partnership, but it has yet to reach its full potential. Meanwhile, the relationship is currently dependent on a Free Trade Agreement (FTA). This was supposed to be announced before Diwali, but it will now most likely take place in 2023.
Between 2010 and 2016, David Cameron, Britain’s Prime Minister, expressed a strong desire to elevate relations with India to the level of a “special relationship,” a term reserved by London for the deep understanding that has existed since World War II.
Cameron, as leader of the opposition, wrote in The Guardian on September 5, 2006, while visiting India, “India has established beyond argument, through its economic and political success, its right to a seat at the top table.”
One of his first foreign trips as Prime Minister was to India, where he and his Indian counterpart Manmohan Singh agreed in principle to improve relations; however, this was not implemented in practice, owing to India’s competing priorities.
When Narendra Modi came to power in 2014, there was renewed hope on Cameron’s part that the economic reforms he promised during his election campaign would serve as a springboard to realizing his vision, especially since the Gujarati Hindu community in the UK desired closer ties as well.
However, hopes were dashed once more, as Modi’s interactions with Cameron’s successor Theresa May proved prickly, with the latter remaining firm in her long-standing demand for the deportation of illegal Indian over-stayers in Britain.
To Modi’s chagrin, she also claimed she couldn’t intervene in matters like Vijay Mallya’s extradition because they were being decided by courts or tribunals.
However, the devastation caused by Covid in both the UK and India — with both countries’ economies falling below minus-20% at one point — triggered their need to boost exports in order to recharge their respective GDPs. As a result, the Modi-Boris Johnson agreement in January to accelerate the economic interface to an FTA.
Six rounds of talks have taken place, the most recent in December in Delhi between British Secretary of Trade for International Trade Kemi Badenoch and Commerce Minister Piyush Goyal.
In contrast to Johnson’s goal, the UK government, led by Prime Minister Rishi Sunak, is no longer chasing a deadline. According to an insider, India was hoping to reach an agreement by March 2023. Whitehall, on the other hand, wants to “get it right”.
According to sources close to the ongoing talks, intellectual property, patents, financial services (including fintech and insurance), legal services, and work visas for Indians are among the sticking points.
Suella Braverman, the British Home Secretary, is opposed to easing immigration restrictions for Indians. Besides, a British official said the UK will only sign off on text that is “equitable and reciprocal”.
Customs duties on selected goods would be reduced or eliminated by both parties in a final draft. Automobiles and scotch whiskies are on Britain’s wish list. India’s emphasis is on clothing, textiles, and food products.
Purists believe that defining the current Indo-British efforts as an FTA would be an exaggeration. According to them, it would be at best a limited Free Trade Agreement, not a comprehensive one, which typically takes years to develop.
Of course, there would be room in the future for mutual agreement to add items to the tariff-free or lower-tariff list, thereby expanding the agreement.
The failure to meet the Diwali deadline was caused in part by the political turmoil in Britain over the summer and autumn, with Johnson and then Liz Truss losing their Prime Ministerships, and Sunak having to prioritize domestic stability before exploring opportunities abroad.
However, an FTA is not a panacea for all ills. The UK-Japan FTA, Britain’s first after leaving the EU, was signed in 2020. It was expected to boost the UK’s exports by 15 billion pounds. However, according to data compiled by the British Department of International Trade last month, exports fell from 12.3 billion pounds to 11.9 billion pounds in the fiscal year ending June 2022.
Source:OCN
