India-UK FTA: A bold pathway to closer trade ties

It addresses India’s concern on weaponisation of environmental and labour standards for disguised protectionism

- Prabhash Ranjan

India and the UK have signed a historic free trade agreement (FTA). Coming on the heels of India’s other key FTAs with Australia and the UAE, the India-UK FTA promises to give a significant boost to the existing bilateral trade of $56 billion between the two countries. Spanning 30 chapters and comprehensively covering a wide range of issues, from trade in goods and services to labour, environment, and gender, the FTA is a new deal for businesses and people in India and the UK.

India’s labour-intensive sectors, such as textiles, leather, gems, and jewellery, are going to be significant beneficiaries of this FTA, as the UK will eliminate its tariff rates on these products. India, on its part, will lower tariff rates for passenger automobiles and other goods that are of interest to Britain. For instance, as per India’s Schedule of Tariff Commitments, the tariff rates on passenger automobile vehicles will be reduced to 11%. However, this reduction has been placed in the staging category E10, which means that the tariff rate shall be reduced in ten equal annual installments. Thus, India has negotiated a more extended transition period, which will allow Indian industry ample time to prepare for the competition it will face from British cars. Moreover, the Indian automobile industry — a key success story of India’s economic liberalisation — is robust and competitive enough to ward off import competition. Thus, the fear that the Indian automobile industry will suffer, as some have opined, due to the India-UK FTA, is exaggerated.