UK-India FTA important, but not essential given robust bilateral trade: UK investment minister Poppy Gustafsson

UK Investment Minister Poppy Gustafsson

Artificial intelligence (AI) technology and security, and pharma—including health technology—are among the key sectors expected to encourage trade and collaboration between the United Kingdom (UK) and India, UK investment minister Poppy Gustafsson told Moneycontrol in an interview.

Gustafsson's comments come as both countries resumed talks on a proposed Free Trade Agreement (FTA) on February 24 after almost a year.

UK’s Trade Secretary Jonathan Reynolds and Gustafsson announced 17 new export and investment deals worth over 100 million pounds during their visits to India this week. Gustafsson also visited Mumbai and Bengaluru cities, promoting investment opportunities in the UK for Indian companies.

"We've identified the key sectors that we think are going to be growth areas to drive the UK economy...We're trying to encourage trade in between those two sectors...They are the ones that I spend a lot of time talking about," she said.

The UK government had identified eight 'growth-driving sectors' as part of its industrial strategy in October 2024. These include advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services.

Gustafsson said these sectors will be 'really supported' as part of the trade negotiations. The UK and India have been negotiating an FTA since January 2022 under the previous Conservative-led government. The current Labour Party government has also expressed its intention to continue these discussions.

Gustafsson said that while FTA is not an essential component - since trade is already happening between the two countries - it remains an important pact.

The trade volume between the UK and India stands at 41 billion pounds for the 12 month period to September 2024, even without a free trade agreement, she said. That said, she noted that the pact will highlight the "valued and cherished relationship" between the UK and India, one that both the nations want to build on.

"We want to see the trading relationships expand and set the framework to support investment between the two nations and know that those investors are investing in a consistent framework between the two countries...If we're already doing 41 billion pounds, just think about what can be achieved once you've got the free trade agreement underway" she said.

Gustafsson noted that it will also be "more important than ever to build strong relationships with allies that you trust and have a history of trading". This comes amid rising fears of tariff imposition by the United States president Donald Trump and their potential implications. India has remained the second largest investor in terms of number of projects into the UK for five consecutive years.

"I think those relationships are going to be a really important aspect, irrespective of that tariff framework, but they will continue to be the foundation that supports successful global economic expansion between either UK or India" she said.

The proposed investment of 100 million pounds by Indian companies in the UK is expected to create hundreds of new jobs over the next three years across a range of sectors including AI, professional services, and textiles.

Among the companies include Professional services firm Aaseya Technologies (£25 million investment, 250 new jobs), robotics firm Sastra Robotics (£8 million, 75 jobs), testing and training services companies Test Yantra (£10 million, 100 jobs), and AI CyberIntel company Deepcytes (£5 million, 80 jobs).

Several companies in the UK's tech and life sciences sectors have also announced expansions to India and struck deals and partnerships valued at tens of millions of pounds.

This include Radio Design, a manufacturer of RF (Radio Frequency) solutions to mobile networks, defence, and aerospace markets; Appliansys, a technology firm whose internet-based education supports students in low or no internet areas; and Novocuris, a digital health tech firm that helps hospitals provide healthcare services to patients.

Push for young professionals visas

Young professional visa is another area where Gustafsson said she is spending a lot of time.

"These are people that are coming out of university years, early on in their career and sharing some of that expertise between UK and India and we've seen some early encouraging signs of that uptake. That's something I would love to see more of, seeing great professionals coming from the UK to India and India to the UK" she said.

Gustafsson also noted that business mobility is currently in a strong place. "All the businesses that I've spoken to have spoken warmly about how easy and reliable it is to bring business skills between the two nations" she said.

Earlier this week, India's commerce minister Piyush Goyal said that greater business mobility will be a key demand in the proposed FTA negotiations, although immigration is not on the agenda.

If India and the UK want to expand trade and investment, "we need to be faster and more liberal in our issuance of visas", Goyal said.

There are over 950 Indian-owned companies operating in the UK and over 650 UK companies operating in India, cumulatively supporting over 600,000 jobs across both economies, the UK government said in a statement.

Responsible and ethical AI

During her Bengaluru visit, Gustafsson also opened the UK-India AI conference at Infosys office on February 26, wherein she launched an open-source Responsible AI Toolkit along with Infosys chairman Nandan Nilekani and Executive Vice President Balakrishna D.R.

The toolkit, a key component of the Infosys Topaz Responsible AI Suite, is designed to help enterprises innovate responsibly while addressing the challenges and risks associated with ethical AI adoption.

The three-day conference brought together representatives from the UK and Indian governments, business, and academia to show progress on the commitments made in the UK-India Technology Security Initiative and the UK’s AI Opportunities Action Plan, including the joint Centre for Responsible and Trustworthy AI.

The Technology Security Initiative was first announced in July 2024, during the foreign secretary David Lammy's visit to India. Through this initiative, both the countries are closely collaborating on critical and emerging technologies including telecoms, critical minerals, AI, quantum, health/biotechnology, advanced materials, and semiconductors.