Hectic negotiations are on between the United Kingdom and India for a Free Trade Agreement (FTA), which could be signed by the middle of 2023. A framework to strengthen economic cooperation between the two countries, the FTA comprises 26 chapters, of which negotiations have closed on 14.
The earlier deadline to close the talks was end-October, but this was missed due to political developments in the UK.
The key sectors that are likely to benefit from the FTA include textiles and handicrafts. “The UK has a big consumer market and appetite for Indian textiles and handicrafts. This FTA would also create more employment opportunities for women who work in these sectors,” Kevin McCole, MD, UK India Business Council, told Moneycontrol.
Digitally driven services would be another focus area. “Digital trade would be transformative. Both countries are knowledge-based economies and both stand to gain, McCole said. India’s new data bill, which has eased data localisation norms, wherein notified countries can store data, also creates opportunities for India and the UK to work on data together, he indicated.
“If the UK could be a notified country, it could be a tremendous boost for UK and India,” said Cole.
Greater collaboration in fintech, manufacturing, and between SMEs in both countries are the other focus areas of the FTA. Getting SMEs to use the FTA has been identified as one of the challenges. “More and more SMEs in the UK are looking at India for manufacturing — as an alternative to China. They are optimistic about the size of the Indian consumer market and demand for products in India. They are also hoping to achieve scale in India,” said the UKIBC Managing Director.
A UKIBC survey of 111 respondents showed that 61 percent reported that it had become easier to do business in India, and 67 percent said Aatma Nirbhar Bharat had helper businesses.
Among the challenges cited, legal and regulatory issues topped the list, followed by complicated processes for GST, and import tariffs barriers. Interestingly price competitiveness and logistics did not emerge as issues.
The UK is hoping to discuss import tariff barriers and India’s Bilateral Investment Treaty rules with the Indian government.
“The BIT model is not seen as very attractive because it requires any dispute to be exhausted nationally before going for international arbitration. There needs to be better dispute resolution and clarity,” said McCole.Both countries are hopeful of bringing in the FTA by early next year, for it to be implemented before 2024.