India-UK Free Trade Agreement (FTA)
India and the United Kingdom (UK) have concluded negotiations on a free-trade agreement (FTA), hailed as a “historic milestone". This agreement is described as more comprehensive than previous trade deals India has signed, setting a new benchmark for equitable and ambitious trade.
Key Benefits and Features
- Market Access:
- Indian companies will have almost tariff-free access to British markets.
- Indian consumers will benefit from gradual tariff reductions on UK imports, affecting high-end engineering goods, automobiles, Scotch whisky, gin, and lamb.
- Public Procurement: The public-procurement market will open up to each other’s companies, potentially leading to savings and efficiency in government spending.
- Economic Impact: The UK predicts a 10 basis points increase in its GDP growth rate annually, with trade expected to rise by over 25 billion pounds, largely from increased imports into India by British companies.
Challenges and Considerations
- Barriers Overcome: Significant barriers existed recently, but political decisions helped overcome concerns, such as the UK's proposed new carbon tax.
- Professional Mobility: Movement of professionals has been eased, though it falls short of expectations for significant visa liberalization. Indians working in the UK are exempt from National Insurance contributions if they continue to pay into Indian provident funds.
Future Prospects and Actions
- Services and Regulatory Harmonization: Further integration of the competitive services sectors and regulatory harmonization, especially in sanitary and phytosanitary standards, is necessary.
- Investment Protection: Additional agreements may be required for investment protection. Finalizing the bilateral investment treaty is essential.
- Upcoming Deadlines for India:
- Avoid reimposition of US duties after the expiry of President's tariff pause.
- Conclude a full deal with the US by Fall.
- Finalize an agreement with the European Union by year-end, crucial for boosting Indian investment, export, and growth.
