A stitch in time

India and the UK concluded a landmark free trade agreement (FTA), marked as a historic milestone by Prime Minister Narendra Modi.

- ASHOK GULATI, SULAKSHANA RAO & RIYA JAIN

N MAY 6, The deal grants India zero-duty access to all industrial goods and eliminates import tariffs on over 99.3% for animal products, 99.8% for vegetable/oil products, and 99.7% for processed foods.

Currently, the UK imports goods worth $815.5 billion, primarily from countries like China (12%, $99 billion), the US (11%, $92 billion), Germany (9%, $76.2 billion), etc. (ITC Trade Map). India is its 12th largest trading partner with a share in the UK's goods imports of a meagre 1.8% ($15.3 billion).

On the other hand, the UK exports goods worth $512.9 billion, mainly to the US ($71.3 billion), China ($46.4 billion), and Germany ($38.8 billion).

As of 2024, India-UK trade in goods stands at $23.3 billion. The UK imports $15.3 billion worth of goods from India and exports $8.06 billion worth of goods (ITC Trade Map, 2024). It largely exports pearls, nuclear reactors, spirits, vehicles, etc. to India, and imports machinery, mineral fuels, pharmaceuticals, apparel, and footwear, etc.

The FTA has set an ambitious target of taking the trade partnership to $120 billion by 2030.

But how will this leap happen? For the FTA promise to translate into real gains, trade must open both ways. India is willing to let British whisky and gin flow more freely, cutting tariffs from 150% to 75%, and further down to 40% over the next 10 years. Also, British cars can run on Indian roads with a tariff slashed from 100% to just 10%.

On the other hand, India can gain in labour-intensive sectors like footwear, toys, and textiles and apparel (T&A). T&A is of particular interest to India as it employs over 45 million workers, and access to high-end markets can benefit those engaged in this value chain.