Implications of the UK-India FTA for India: Key Advantages
Prime Minister Narendra Modi recently announced a significant achievement in India-UK relations with the conclusion of a Free Trade Agreement (FTA) between the two nations. This landmark deal, described as India’s most extensive trade agreement, is expected to be officially signed during British Prime Minister Keir Starmer’s visit to India later this year. The FTA aims to eliminate tariffs on 99% of Indian products entering the UK, while also facilitating the movement of Indian professionals to the UK, all within the framework of the UK’s existing immigration policies.
Impact on Trade Relations
The India-UK FTA marks a pivotal moment in the trade relationship between the two countries, which are among the world’s largest economies. Following three years of negotiations, the agreement is set to enhance trade volumes significantly. In the fiscal year 2023-24, trade between India and the UK reached $21.34 billion, up from $20.36 billion the previous year. The goods exchange during the period from April to January 2024-25 also saw an increase, reaching $21.33 billion compared to $20.26 billion in the previous year. This growing trade relationship has resulted in a favorable trade surplus for India, indicating a robust economic partnership.
Officials from both countries have expressed optimism about the benefits of the FTA. They believe it will provide Indian consumers with access to high-quality products at competitive prices, thereby stimulating domestic consumption and economic growth. For British businesses, the agreement opens up access to India’s vast and growing market, aligning with the UK government’s goals for economic expansion.
Benefits for India
The FTA is poised to offer extensive market access for a wide range of Indian products, covering nearly all of India’s export priorities. With the elimination of tariffs on approximately 99% of trade value, India stands to gain significantly from enhanced trade relations with the UK. The agreement is expected to benefit various sectors, including textiles, marine products, leather, and engineering goods, by creating new export opportunities.
Additionally, the FTA will reduce tariffs on labor-intensive products such as leather goods, garments, and frozen seafood, making Indian exports more competitive in the UK market. The automotive sector will also see a reduction in duty rates, with UK-made cars facing a decrease from over 100% to 10% under a quota system. This change is anticipated to make British cars more affordable for Indian consumers.
Moreover, the agreement includes provisions for the inclusion of additional professional categories, such as chefs and musicians, within the UK’s visa pathways. This is expected to facilitate greater mobility for Indian professionals seeking opportunities in the UK.
Long-Term Economic Goals
The FTA is not only a trade agreement but also a strategic move towards deeper economic integration between India and the UK. The UK’s Department for Business and Trade projects that the FTA could add an additional GBP 25.5 billion to the existing bilateral trade of GBP 41 billion in the long term. This ambitious target aligns with the goal of reaching USD 100 billion in bilateral trade by 2030, as outlined in the 2030 Roadmap. Industry experts view the FTA as a transformative accord that underscores the commitment of both nations to strengthen financial ties, enhance technological partnerships, and create a conducive environment for business growth. The agreement also addresses contemporary issues such as gender rights and support for small and medium enterprises, reflecting a modern approach to trade relations. Overall, the India-UK FTA represents a significant step forward in international trade, promising to create job opportunities and foster economic growth in both countries. As the details of the agreement are finalized, stakeholders remain optimistic about the potential benefits for their respective economies.
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