India-UK FTA talks gather pace amid Piyush Goyal’s visit

Negotiations to finalize a free trade agreement (FTA) between India and the UK got a leg up this week, with talks focusing on ways to add further momentum for a mutually beneficial deal.

Indian commerce and industry minister Piyush Goyal was in the UK on a two-day visit to evaluate the progress of the pivotal deal and the ongoing Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA).

“(We) discussed how both sides can add further momentum to the India-UK FTA negotiations for a mutually beneficial deal,” Goyal tweeted on Tuesday.

Goyal held talks with his UK counterpart-business and trade secretary Kemi Badenoch.

Data from the UK’s Department of International Trade (DIT) projects that Indian exports to the UK will grow to $14.1 billion by 2035, if both countries seal the FTA, against $6.1 billion in the absence of such an agreement.

On the other hand, imports from the UK are projected to grow to $21.6 billion by 2035 upon the FTA’s conclusion.

In the 10 months between April 2022 and February 2023, ministry of commerce and industry data showed that India’s merchandise exports to the UK were at $10 billion, accounting for 2.5% of the overall export share.

Merchandise imports from the UK in the same period amounted to $8 billion, representing 1.3% of all imports. On total trade volumes, the UK ranked as India’s 15th largest trading partner during the period.

Meanwhile, neither side has given a deadline for completion of the deal, sparking speculation that it may be finalized only before the 2024 Indian general election.

Representatives of both sides have held 11 rounds of intense negotiations since January last year.

Data localization rules that block foreign companies from taking data out of India and allowing UK firms to bid for public sector contracts are some of the sticking points.

Till date, out of 26 policy areas, 14 were substantially closed for negotiations, while significant progress was made in other chapters, Business Standard reported.

UK’s minister for international trade, Nigel Huddleston, who was in India last week, told news agency Press Trust of India that progress has been made on half of the chapters in the India-UK FTA agreement, and efforts are underway to finalize the negotiations as swiftly as possible.

Huddleston said the UK would welcome tariff reductions on Scotch whisky and automobiles, and emphasized the significance of addressing non-tariff barriers, streamlining paperwork, and using digital signatures to facilitate smooth trade operations.

Amarjit Singh, CEO of trade consultancy India Business Group in London, said Goyal’s UK visit comes at a crucial time to advance the bilateral FTA talks between the world’s fifth and sixth largest economies, highlighting the significance of this partnership to businesses in both jurisdictions.

“Both governments remain deeply committed to achieving an ambitious, comprehensive and mutually beneficial agreement which will make it easier for businesses to export and invest in each other’s countries, as well as boost innovation, research and knowledge exchange,” he said.

Dr. Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations (FIEO), told Press Insider, “There may be few points left where there is disagreement between the two sides, but Goyal’s visit will ensure we reach a consensus on those issues also, which may lead to the early operationalization of the free trade agreement with the UK”.

Sahai said that following the FTA deal, Indian exporters having access to the UK market in several segments will be able to penetrate further in the market.

UK’s strategic approach report on FTA mentions that the three Indian sectors expected to benefit the most following reductions in UK tariffs and regulatory barriers are textiles and apparel, motor vehicles and parts, and construction.

The UK tariff on final textile goods is up to 9.6%, which is applied to imports of apparel from India, such as clothing, swimwear and accessories, and scarves. It is estimated that annual duties on Indian exports of textiles and textile articles to the UK were £120 million ($155 million) in 2019.

Meanwhile, during his visit, Goyal also met Swiss state secretary for economic affairs Helene Budliger Artieda.

“Deliberated on ways to give further strength to the trade and economic partnership between India and European Free Trade Association (EFTA) member nations,” Goyal tweeted on Wednesday.