Possible outcomes of India-UK trade deal

India faces complex negotiations ahead that could restrict domestic policy space and economic interests

- AJAY SRIVASTAVA

In a telephonic conversation on March 12, the Prime Ministers of India and the UK agreed to work towards the early conclusion of a mutually beneficial free trade agreement (FTA). We can expect the India-UK FTA to be signed soon after a new government is formed in India post-elections.

For the UK, the FTA is part of a strategy to establish new trade partnerships following its departure from the European Union. Meanwhile, India is concluding new FTAs in fast-track mode, as if to change its image of becoming protectionist. The shift came after India suddenly withdrew from the 16-nation Regional Comprehensive Economic Partnership (RCEP) negotiations in November 2019.

In the last four years, India has signed FTAs with Mauritius, the UAE, Australia, and the European Free Trade Association (EFTA) countries (Switzerland, Norway, Iceland, and Liechtenstein) in a fast-track mode. The FTA with the UK will be the fifth one signed by India after exiting the RCEP.

India's FTA partners warmly reciprocate the fast-track negotiation strategy, as the FTA with India allows access to a large and growing market, bypassing high tariff walls.

The FTA is expected to boost bilateral trade flows. In FY23, trade between India and the UK exceeded $57 billion, with India earning $13.34 billion more than it spent. India sold $11.40 billion in goods and $23.80 billion in services to the UK and bought goods worth $8.96 billion and services worth $12.90 billion from the UK.