India poised to secure FTAs with UK, Oman, but what's the deal? MC Explains

Prime Minister Narendra Modi with his UK counterpart Rishi Sunak

India's proposed free trade agreements (FTAs) with the UK and Oman may get included in the Centre's 100-day agenda, a plan outlining the immediate steps to be taken by the government that is formed after the parliamentary election ends in June, an official told Moneycontrol.

While the trade deal with Oman was announced last year, discussions with the UK government started in January 2022. Both deals are in advanced stages and are likely to be signed after the Lok Sabha elections.

Moneycontrol explains the economic advantages for India from both the agreements.

A free trade agreement (FTA) is a pact between two or more countries to facilitate trade and reduce barriers such as tariffs and quotas on goods and services exchanged between them. The primary aim of FTAs is to promote economic integration among the participating countries through tariff reduction or elimination, investment and trade facilitation, and dispute resolution mechanisms. Such pacts look to create a more conducive environment for businesses to operate across borders.

The FTA negotiations hold strategic importance for India primarily because of Oman's proximity to the vital oil passage of the Strait of Hormuz.

In 2022-23, trade between both countries increased to $12.39 billion, more than doubling from $5.4 billion in 2020-21.

Through the deal, India seeks lower tariffs on exports such as rice, pharmaceuticals, petroleum, and steel products, alongside better entry opportunities for Indian professionals such as doctors, nurses and engineers.

Oman is striving for increased access to downstream petroleum products, fertilisers and iron and steel products in the Indian market.

UK-India trade amounted to over £23 billion in 2019, and both sides agreed to double bilateral trade by 2030.  The FTA is expected to boost Indian exports in labour-intensive sectors like leather, textiles, jewellery and processed agriproducts.

Mutual recognition agreements on pharma could provide additional market access while the pact would also spur exports in service sectors like IT/ITES, nursing, education, healthcare including AYUSH, and audio-visual services.

India would seek special arrangements for the movement of its people. Both countries look to seal a deal with balanced concessions and a market access package in a wide range of sectors.

Though significant progress has been made on the proposed trade pacts with the UK and Oman, a few sticking points remain.

India and Oman are yet to resolve issues related to customs duty concessions on certain petrochemical products used primarily in the plastics industry. With the UK, a sticking point is London's reluctance over New Delhi's stand on utilisation of local components for British automakers.

India has also been pushing for the inclusion of social security payments for Indian workers in the UK, but British trade secretary Kemi Badenoch is reportedly “keen to avoid” this. Visas and social security are among the most politically sensitive parts of the proposed deal.

By January 2024, India and UK had reached the 14th round of negotiations.

Since the Model Code of Conduct came into force with the announcement of the election schedule, the trade deals will not be signed before the next government assumes office. There are no plans to seek permission from the Election Commission of India to ink these FTAs while the MCC is in force, a government official told Moneycontrol on March 28.

This means India will be able to push through the key FTAs, which are inching closer to finality, only once the next government takes up the mantle.