India, UK FTA Negotiations: Key Updates
India trade negotiators in UK for final effort to secure FTA before poll code is triggered
As India heads into election mode in April-May, the the Model Code of Conduct (MCC) is expected to get triggered in a few weeks once the poll dates are out.
Secretary Sunil Barthwal will lead a delegation from the Indian commerce department to London to address key issues concerning the proposed trade agreement. The visit follows a recent review of the deal’s progress by the Prime Minister’s Office (PMO).
In January, a delegation from the UK, headed by Chief Economic Adviser Douglas McNeill, engaged in discussions with key government officials in New Delhi on matters pertaining to the FTA and an investment treaty. McNeill spoke with representatives from the PMO, Commerce and Industry Minister Piyush Goyal, Finance Minister Nirmala Sitharaman, and Economic Affairs Secretary Ajay Seth.
If the India-UK FTA negotiations cannot be concluded promptly, further discussions may need to be postponed until after the elections, depending on the priorities of the incoming government. It should be noted that UK elections are anticipated to take place in the latter half of 2024.
14th round of talks begin January 10, 2024
The 14th and concluding round of negotiations for a free trade agreement between India and the UK commenced on Wednesday, focusing on resolving remaining issues. These include aspects such as business mobility, Scotch whiskey, automobiles, farm products, pharmaceuticals, rules of origin, and a separate agreement to enhance bilateral investments, according to three officials with direct knowledge of the matter.
Technical issues and political sensitivities in an election year will no doubt make the latest round of negotiations a challenging one.
India-UK FTA negotiations complete 13 rounds
Shifting deadlines: India hopes to conclude talks by January
As multiple goal posts pass us by, Indian officials are reportedly hoping for a January resolution to the FTA talks as the country goes into general elections April-May 2024. However, at this stage, there can be no assurances as multiple media reports indicate continued differences on core sensitive issues.
Ayurveda products not part of FTA negotiations
Responding to a query by The Hindu, an official UK source noted that market access for Ayurveda products were not part of ongoing FTA talks and will be taken up separately. According to a 2014 list published by the UK Medicines and Healthcare Products Regulatory Agency, several Indian ingredients such as sarpagandha (Rauwolfia serpentina) and khat or qat (Catha edulis), frequently used in Ayurvedic products, are either “banned” or “restricted.”
UK sending ‘largest ever’ delegation to the Bengal Global Business Summit
Scheduled to be held November 21-22 at Kolkata, the capital of West Bengal state, the UK is sending a 55-member delegation to the Bengal Global Business Summit (BGBS) from across business and institutions.
UK companies represented in the delegation include Teknobuilt, AirNode, SmartViz, Xworks Tech, Hy-Met Limited, Cambridge Carbon Capture, and GreenEnco as well as older engineering companies like Mott Macdonald, per reporting in the Economic Times.
The UK-India 2030 Roadmap agreed by our prime ministers promised to transform trade and investment between the UK and India. That’s what we are here to do. – Dr Andrew Fleming, British Deputy High Commissioner to East and Northeast India
UK wants higher GI protection for agri products
UK negotiators are insisting on enhanced protection for the country’s geographical indication (GI) products originating from the agriculture sector. Key British GI items, such as Scotch whisky, Stilton cheese, and Cheddar cheese, are at the center of talks as both parties work to reconcile their differences.
External affairs minister Jaishankar on 5-day visit to the UK
India’s external affairs minister S Jaishankar is in the UK on an official five-day visit from November 11-15, which coincided with Diwali celebrations. The two countries have a Comprehensive Strategic Partnership, which was launched in 2021, and a India-UK Roadmap to 2030.
FTA talks have completed 13 rounds, yet both countries have yet to reach the middle ground. A proposed visit from the UK PM Rishi Sunak missed the end of October and Diwali dates.
In Jaishankar’s words, the two sides are trying to establish a “landing point” for FTA that is workable for both.
Meanwhile, the UK cabinet has newly appointed officials this week after a reshuffle: Foreign Secretary David Cameron, Defence Secretary Grant Shapps, and Home Secretary James Cleverly. Sunak is seeking to maintain a stable government as the Conservative Party faces grim re-election prospects. The next UK general election is scheduled to be no later than 28 January 2025.
India’s position on EV tariff concessions
As reported in the Economic Times on November 8, India has not yet reached a conclusive position regarding import duties on electric vehicles. Unnamed sources speaking to the paper stated that New Delhi was considering a 30 percent concessional tariff on 2,500 EVs imported from the UK, provided they are priced above US$80,000. As stated in the previous update on this tracker, India currently levies 70-100 percent duty on cars imported as completely built units depending on their price.
India is a cost-conscious market and the top EV seller is the Nexon.ev from Tata Motors priced at US$18,000 (INR 1.5 million). Moreover, the government is keen to develop domestic manufacturing capabilities in this frontier sector.
Gaps in FTA negotiations remain, the UK demands new EV concessions
As of November 6, Business Line is reporting that five chapters covering sensitive topics—intellectual property rights, rules of origin, financial services, work visas, and tariff cuts on key items—are yet to be ironed out, per sources speaking to the paper. If negotiators don’t reach common ground by latest January end, the FTA talks will get delayed to after India’s general elections. By January-February, India goes into the Budget Session mode. Further, once the election schedule is announced, the Model Code of Conduct immediately comes into effect preventing any new policies to be introduced by the incumbent Narendra Modi government.
Meanwhile, Livemint is reporting that in an unexpected development, the UK is seeking a waiver of duties for fully assembled electric vehicles (EVs) falling within the price range of US$40,000 to US$60,000 (equivalent to INR 3.33 million to 4.99 million). The move is surprising because India had previously excluded this category of vehicles from its list of eligible tariff concessions. New Delhi had only intended to grant potential concessions to premium electric vehicles with a price tag of US$90,000 or more. Indian automakers like Tata Motors and Mahindra & Mahindra are also expected to release new premium EV models in 2024.
As of FY2024, electric vehicles represent a modest 1.6 percent of the Indian passenger vehicle market, at just over 43,500 units. Last year, only 49,800 EVs were sold out of 3.8 million passenger vehicles, per BloomberNEF.
This is because a substantial 70 percent import duty imposed on fully assembled imported premium cars, such as Hyundai’s Ioniq 5, Kia’s EV6, and the BYD Atto 3. Also, EVs priced above US$40,000 are subject to a 100 percent duty.
Nevertheless, the Indian EV market is poised to expand as the government contemplates reducing tariffs to 15-30 percent for automakers selling EVs priced up to US$25,000 to US$35,000. A caveat may be attached to the tariff relaxation, requiring local manufacturing within two to three years.
India, UK may find middle ground on investment pact
Per media reports in India, trade negotiators from the UK and India may be reaching some sort of compromise on dispute resolution under the proposed bilateral investment pact (BIT).
India wants UK companies to exhaust all local judicial remedies before pursuing international arbitration. The UK, on its part, has appeared reluctant to have the BIT as part of the FTA deal and find dispute resolution to be a long-winded process in India. Moreover, the UK wants ‘pre-establishment national treatment’, in which circumstance foreign entities can take to overseas arbitration even before an investment is made.
India has lost major international arbitration cases in recent years, such as in disputes with Cairn Energy PLC, Vodafone Group BV, and Devas Mauritius Ltd. These had been initiated prior to updates made to the Bilateral Investment Treaty framework in 2015. Following the circulation of the updated model BIT framework, India had quietly terminated existing bilateral investment treaties.
India, UK free trade deal unlikely to be closed by October end
The Business Standard has learnt that India and the UK are unlikely to finalize their highly anticipated trade deal by the end of October due to unresolved differences between the two parties. “…Officials from the Indian side are currently in London for negotiations”, indicating that the trade talks remain a high priority.
According to a report in the Financial Times on Wednesday, citing unnamed British officials, one of the causes for the delay is the limited progress in granting British professional service providers, such as law and accountancy firms, access to the Indian markets.
No official confirmation has yet been released on PM Sunak’s anticipated visit to India end of October.
India-UK trade deal negotiations at an “advanced stage”
India-UK trade deal negotiations at an “advanced stage” with key differences narrowing, according to informed officials speaking to the media on October 13. Progress made in resolving issues, including business mobility, Scotch whisky, and automobiles, raise hopes for a potential breakthrough within two weeks. Recent visits by Indian commerce secretary Sunil Barthwal to London and his UK counterpart’s trip to New Delhi have boosted the negotiation efforts.
Pending issues in the FTA discussions: What the papers are saying in India
The India-UK FTA pact will be the most comprehensive trade agreement signed by India. Of the 26 chapters, in-principle agreement or broad consensus has been reached on 24 chapters.
Areas that await final agreement include the rules of origin, where product-specific rules, value addition, change in the chapter heading, and certification are being discussed, per reporting in The Economic Times.
India does not want the UK to be used to route goods to India as that inflates its import bills; the country’s trade deficit hit US$263 billion in FY 2022-23, up from US$191 billion in FY 2021-22.
On its part, UK negotiators want a more streamlined Customs bureaucracy.
Under intellectual property, chapter considerations pending final consensus may be with regard to 37 changes demanded by the UK’s life sciences and biotech sectors. India’s intellectual property rights are also being discussed.
India-UK bilateral trade increased to US$20.36 billion in 2022-23 from US$17.5 billion in 2021-22.
FTA talks status: Broad understanding on 24 chapters but no certainty that Round 14 is final
Per sources speaking to the Hindustan Times (HT), a broad understanding has been reached on 24 out of 26 chapters in the proposed FTA deal. HT reports that if positive outcomes are reached in the negotiations, PM Sunak will make his proposed 4-day visit to India, potentially starting October 28.
The British delegation is reportedly actively pursuing expanded entry into the Indian market for five specific products, including dairy items, electric vehicles, and Scotch whisky.
Areas of contention on the Indian side remain the rules of origin for goods and the facilitation of professional mobility. The British are reluctant to exceed the current quota of around 100,000 annual work visas granted to Indian nationals. In response, India has highlighted that skilled professionals across various sectors often do not require long-term visas, as their assignments typically involve shorter duration.
HT also reports that besides business-related mobility issues like visas and allowing skilled workers to change jobs, UK and Indian negotiators have reached “a broad understanding” on matters related to labor standards and green and sustainable business practices.
Round 14 of the FTA talks began October 9, Monday, in New Delhi.
UK PM Sunak due to visit India October-end
UK Prime Minister Rishi Sunak is set to make an official visit to India for four days at the end of this month [likely starting October 28, per sources quoted in the Indian media]. During the visit, he and Indian Prime Minister Narendra Modi may attempt to make important decisions on key issues hindering the India-UK FTAto prevent indefinite delays, according to sources closely following the situation, as reported by Business Line. The source told the paper: “The free trade deal is stuck on just a handful of issues where a decision would now have to be a political call. If the two PMs decide to settle the matter during Sunak’s visit, we could have the FTA immediately. Otherwise it will go back to the negotiators and it can be anyone’s guess how long it would take to get resolved. One must also not forget next year’s elections in both countries…”
Next round of India-UK FTA talks from October 9
A 30-member UK delegation is in India, and negotiations for the proposed bilateral investment treaty (BIT) with finance ministry officials are advancing rapidly, per reporting from The Telegraph. Pending issues, like the rules of origin provisions, are at the “closure level”, according to an official source. The BIT is being negotiated as a separate agreement between India and the UK.
The two sides recently concluded the 13th round of negotiations.
India-UK FTA maybe signed by October
The Financial Express is reporting that British PM Rishi Sunak is expected to travel to India in late October to sign the India-UK FTA.
Previously in September during the G20 meetings, it was reported by the British press that Sunak was against any “quick-fix trade deal with India”. It now appears that all outstanding issues have been resolved.
The Bilateral Investment Treaty (BIT) will be signed later, however, as both sides have yet to reach common ground.
In the meantime, the India-UK Infrastructure Financing Bridge will address any bilateral issues in investments.
Phasing out import duties on Scotch whisky
Business Line is reporting that while Indian negotiators may be open to reducing import duties on Scotch whisky to 75 percent at the outset, similar to India’s approach with Australian wines, they want the ultimate reduction to be spread over a 10-year span rather than the three years proposed by the UK. India is also advocating for a Minimum Import Price (MIP) as the threshold for implementing duty reductions.
In 2022, India surpassed France to become the largest purchaser of Scotch whisky by volume, as reported by the Scotch Whisky Association.
India has taken a tough stance on migration and mobility for its students and professionals and in the absence of clear gains on those fronts, Indian negotiators are unlikely to concede to the UK’s proposals, such as on liquor and automobiles. After all, per the UK’s Department for International Trade, “The majority of product lines (66%) on Indian exports to the UK face no tariffs. In comparison, only 3% of product lines on UK exports to India can enter tariff free.”
No quick-fix trade deal can be expected as G20 Summit round the corner
The Guardian is reporting that British PM Rishi Sunak is ruling out any “quick-fix trade deal with India”. Sunak has rejected the idea of a early harvest deal, as followed between India and Australia, opting instead for the ‘comprehensive’ framework. An early deal would have covered limited sectors. On its part, India has not rushed UK negotiators as well in completing FTA talks.
It is increasingly appearing that deal negotiations between the two countries may slip into 2024, and may not be confirmed by the current governments.
Sticky issues per British media
The UK is advocating for stronger IP protections for companies engaged in trade with India, particularly in the pharmaceutical sector, as Western companies are anxious about Indian laboratories potentially manufacturing their drugs more affordably.
On its part, India wants to limit the proportion of UK-produced goods that can be manufactured outside the UK to prevent misuse of the India-UK trade agreement and have other countries indirectly benefit.
Why the 2023 deadline looks unfeasible at this point
Observers believe that as negotiations drag on, the FTA will lose political priority status as both leaders shift attention to their 2024 general election campaigns.
Round 13 of FTA talks: September 4
The Round 13 of India-UK FTA discussions will begin September 4.
Round 12 discussions ended August 31, 2023. Both sides are keen to conclude the talks as soon as possible.
Officials are being tight-lipped about details of the progress made. A fresh bilateral investment treaty is being prioritized, among other things.
Last leg hurdles: Concern’s over Sunak conflict of interest
UK Labour MP Darren Jones, chair of the cross-party House of Commons Business and Trade Select Committee, has raised concerns over the British PM Rishi Sunak’s conflict of interest in terms of how the FTA deal with India could benefit IT services giant Infosys. Sunak’s wife, Akshata Murthy, owns Infosys shares worth 500 million pounds and is the daughter of Infosys co-founder Narayana Murthy. The Indian negotiations team is seeking provisions to gain easier access to the UK for several thousand contract workers in sectors like IT and AI.
India is currently negotiating for a social security agreement and a fresh bilateral investment treaty (BIT) [not following the BIT 2016 model] under the FTA.
Several chapters closed, final stages of FTA negotiations: UK trade minister Badenoch
Speaking in Jaipur with Indian media, the UK minister for business and trade informed reporters that discussions around business mobility and the bilateral investment treaty are currently underway.
The UK is the largest European market for IT services from India. Visas and visa liberalization are, however, not in the ambit of the FTA, and are separate immigration issues, Badenoch clarified. That is managed by the UK Home Office and their points-based (visa) system.
19 months of negotiations in, several chapters (19 out of 26) of the FTA now appear to be concluded. Badenoch’s visit has coincided with the ongoing 12th round of FTA talks.
On progress and deadlines to the FTA’s implementation, the UK trade minister was optimistic but cautious over spilling any details to the media. Badenoch said: “I cannot go into the details of all the negotiations — the chief negotiators know the details. We don’t want to interfere with the work that they are doing. But what I will say is that like any negotiations, the hardest bits tend to come at the end.”
After the G20 ministerial meeting, Badenoch travels to New Delhi to hold meetings with business representatives and her Indian commerce and industry counterpart, Piyush Goyal.
Meetings planned for the sidelines of the G20
Speaking with the media on August 18, Commerce Secretary Sunil Barthwal said that India intends to to engage in bilateral discussions regarding FTAs with the UK, EU, and Canada on the sidelines of the G20 Trade and Investment Ministerial Meeting (TIMM), scheduled from August 23-25. Also on the agenda will be WTO reforms and trade logistics.
British officials say UK, India are ‘laser-focussed’ on FTA issues
Speaking to the media, British officials noted that UK negotiators were ‘laser-focussed’ on goods, services, and investments, encompassing some of the chapters with sticky issues yet to be closed in the FTA discussions.
UK Business and Trade Secretary Kemi Badenoch will attend the G20 Summit. Badenoch will attend the G20 Trade and Investment Ministerial Meeting in Jaipur scheduled for August 24-25 and then bilateral talks with Indian Commerce and Industry Minister Piyush Goyal.
Trade and investment working group meet: August 21-22
India may conclude negotiations to its FTA with the UK by as early as September. The two countries will have a trade and investment working group (TIWG) meeting in Jaipur on August 21 and 22. Chapters covering rules of origin, bilateral investment treaty, and intellectual property rights, among others, are yet to be closed in the trade negotiations.
Per reporting in the Business Standard, the twelfth round of talks could go up to August 28.
A senior government official speaking to Moneycontrol noted that quick resolution of pending issues is expected as senior officials will be present in India for the G20 meetings. The G20 Summit itself is slated to take place on September 9-10 at New Delhi.
The UK is India’s 15th largest trade partner.
Consensus on some sticky issues
India is agreeing to cut tariffs on British car and Scotch imports. The UK is reportedly agreed to relax some visa rules for Indian professionals. These discussions are currently private per government sources. Both India and the UK will hold national elections in 2024.
- On cars, India may cut tariffs to 75 percent from 100 percent. However, this will not cover small capacity cars. There will be also limits to the number of British cars sold under the lowered tariff duty. Discussions are also underway on import duty reductions on Scotch whisky, which may be slashed to 100 percent above the minimum import price instead of the existing 150 percent.
- Given that one-in-three residence visas are being granted to Indian workers and net migration to the UK reached 606,000 in 2022, Prime Minister Rishi Sunak will be under pressure to not grant too many concessions. It is likely that the FTA talks center on introducing time-bound business visas for highly skilled workers from India.
New Delhi is also eager to incorporate a social security arrangement into the FTA with the UK. This would ensure that Indian professionals working in the UK for a brief duration do not incur losses (half a billion pounds worth, per Indian officials) in social security contributions that they are unable to avail benefits from.
Round 12 talks: Starting August 8
Chief negotiators from India and the UK will hold their 12th round of discussions in New Delhi from August 7/8. Key issues that may come up include the investment treaty, duty concessions on automobiles and whisky, and matters pertaining to services, per an official speaking to The Economic Times.
India-UK bilateral trade in 2022-23 was US$20.36 billion, up from US$17.5 billion in 2021-22.
The twelfth round may be extended if stakeholders find it necessary, India’s Chief Negotiator Nidhi Mani Tripathi told a press briefing on August 14.
Round 11 outcomes
- Per reporting in The Hindu, “both sides are working to iron out differences on issues including investment treaty, intellectual property rights (IPRs) and rules of origin”: Senior government official.
- As per India’s commerce secretary Sunil Barthwal, the India-UK FTA will be concluded before the end of 2023. It will be India’s most complex FTA agreement till date and will serve as a standard template for future FTA negotiations.
- On July 28, media sources reported that India and the UK have reached a significant agreement on contentious matters concerning whiskey and automobile tariffs in the ongoing FTA negotiations. Business Today is reporting that the India-UK FTA is likely to incorporate a minimum import price (MIP) for bottled Scotch, along with reduced import duties for both bottled and cask whiskey. Currently, these import duties stand at 150 percent but could be reduced to 100 percent for bottled scotch and halved to 75 percent for casks. Additionally, ongoing negotiations involve the possibility of gradually lowering customer duty on bottled Scotch over a 10-year period, with the target of reaching 50 percent eventually. It is speculated that India might agree to an MIP of US$4 per bottle, which could lead to a potential influx of Scotch imports from the UK.
- During the recently concluded eleventh round of FTA talks, India and the UK engaged in detailed discussions on the draft treaty text in nine policy areas. The commerce and industry ministry confirmed that these technical discussions took place across 42 separate sessions, covering various aspects of the agreement. So far 19 out of 26 chapters have been discussed and closed.
- The twelfth round of negotiations is due to be scheduled.
Round 11 of negotiations: July 10-18, 2023
Per a senior government official speaking to the media, India is in a position to conclude five chapters in this round of negotiations, which covers subjects including environment, labor, and digital trade.
Thorny issues in the India-UK FTA negotiations are intellectual property rights (IPR), rules of origin, and services. So far, 14 out of 26 chapters have been closed during the bilateral FTA negotiations.
During his two-day visit to London (July 10-11), Union Commerce & Trade Minister Piyush Goyal said that India is working with countries like the UK to modernize its IPR protocols. Goyal met with UK Secretary of Trade Kemi Badenoch and the two ministers discussed identifying and focusing on low-hanging fruits, “which included the closure of several chapters in the negotiations. “
Other schedules on the trip included an interaction between the Indian commerce and trade minister and UK businesses and industry representatives as well as a Business Roundtable involving stakeholders of various sectors of mutual interest for India and the UK. Goyal urged businesses in India and the UK to take advantage of various Government of India initiatives. He also interacted with the members of UK chapter of Institute of Chartered Accountants of India (see Press Release).
Progress check: July 2023
Nigel Huddleston, the UK’s Minister for International Trade, speaking with Indian news agency PTI says that progress has been made on half of the chapters in the India-UK FTA agreement, and efforts are underway to finalize the negotiations as swiftly as possible.
While tariff reductions on Scotch whiskey, automobiles, etc. would be welcome, Huddleston stressed the significance of addressing non-tariff barriers, streamlining paperwork, and using digital signatures to facilitate smooth trade operations.
Invest India notes that UK companies have made substantial investments of approximately US$33.87 billion in the Indian market, while it is estimated that 900 Indian firms operating in the UK contribute a turnover of $68 billion.
Media report on ‘red lines’ drawn by India to safeguard domestic stakeholders
As the back and forth talks continue between trade negotiators to the India-UK FTA, the Indian government has reportedly established certain ‘red lines’ – areas where it will not compromise. According to an official speaking with BusinessLine, these include the production of generic medicines, regulatory data protection, and the inclusion of small and medium enterprises (SMEs) in government procurement.
Non-negotiable stance on clinical drug trial data
- Regarding Intellectual Property Rights (IPR), India is actively engaged in discussions with the UK. However, India will not yield to demands for data exclusivity and patent term extensions, as these would hinder the production of affordable life-saving generic drugs within the country. This is a stance that cannot be compromised, the source emphasized.
Data exclusivity grants exclusive rights to companies over their drugs’ clinical data and can prevent other manufacturers from introducing cheaper generic versions, even in the absence of patent protection. Effectively, data exclusivity could be exploited to extend the patent life of a drug beyond its original term by making minor adjustments to its formulation and securing rights over the clinical data. Patent term extension involves granting a longer period of patent protection to compensate for the time spent awaiting regulatory approvals.
- India also refuses to undertake any commitments in the realm of data protection and related areas, such as data localization. The absence of a digital policy in India necessitates the inclusion of a carve-out specifically addressing this concern within the proposed Free Trade Agreement (FTA), as stated by the source.
- Government procurement is another area where India is open to negotiations but its public procurement policy is designed to support and foster small and medium enterprises, and any compromise in this regard is not acceptable, the source asserted.
Joint outcome statement: UK-India round 10 FTA negotiations
A brief statement was released on June 19 by the UK government on the ongoing trade talks – see here.
“Technical discussions were held across 10 policy areas over 50 separate sessions. As with previous rounds, this was conducted in a hybrid fashion – a number of UK officials travelled to New Delhi for negotiations and others attended virtually. The eleventh round of negotiations is due to take place in the coming month.”
Status after 10th round of negotiations
On June 15, at a press briefing, India’s commerce ministry officials stated that India-UK FTA negotiations have substantially concluded for 14 chapters out of the total 26 chapters.
Per reporting in Money Control, an anonymous insider source said that the parties to the negotiations were coming closer on the discussions on labor, environment, and rules of origin (ROO).
According to data from the Ministry of Commerce and Industry, India’s merchandise exports to the UK reached a total of US$10 billion between April 2022 and February 2023, accounting for 2.5 percent of the overall export share. During the same period, merchandise imports from the UK amounted to US$8 billion, representing 1.3 percent of all imports. In terms of total trade volume, the UK ranked as India’s 15th largest trading partner during this period.
Tenth round of negotiations: June 5-9, 2023
Of the 26 policy areas in the UK-India FTA, 13 chapters have been substantially completed. The remaining areas or chapters require both parties to align their expectations. The UK demand for tariff reductions on British whisky and automobile exports to India continues to be a problem.
It has been reported that one strategy India could be willing to adopt to allow UK passenger vehicle imports is via a tariff rate quota (TRQ). India has one with the UAE, for example, for gold imports. The TRQ would place a ceiling on the number of vehicles imported from the UK at a concessional FTA tariff rate. The import duty structure would ultimately be phased over a specified period of time; Business Standard has quoted unnamed sources as saying five years in an article published June 4, 2023. However, it remains to be seen if this strategy would be acceptable to UK trade negotiators and industry.
In the automotive sector, India’s customs duties for fully assembled vehicles vary between 70 percent and 100 percent, depending on the specific category. Domestic passenger vehicles sales in 2022-23 were 3.89 million. Meanwhile, under spirits and wines, India’s import tariff applicable on Scotch whisky is 150 percent. India’s whisky market share is 97 percent and Scotch whisky makes up only 2.8 percent of the market.
UK House of Commons International Trade Committee report
As the UK-India FTA negotiations enter the next round, the UK Parliament has raised concerns about the lack of information sharing by the UK government regarding the trade talks.
Areas of concern include India’s Digital Data Protection Bill, which could impose data localization requirements, non-tariff barriers faced by UK automotive exports, and market access relaxations for India in various sectors, such as textiles, apparel, footwear, and horticultural products. Such relaxations could potentially impact the preferential access that the UK currently provides to developing countries in South Asia, Southeast Asia, and East Africa.
The UK government has been given a deadline of two months to respond to the committee report’s findings and questions. See here for the UK parliament committee report.
According to data from the UK Department for Business & Trade: Total trade in goods and services between the UK and India was £34 billion in the four quarters to the end of Q3 2022, showing 51.7 percent growth or £11.6 billion in current prices from the four quarters to the end of Q3 2021.
Out of this £34 billion, total UK exports to India amounted to £14.8 billion in the four quarters ending at Q3 2022, indicating an increase of £6.4 billion or 75.5 percent in current prices from the same period the previous year. Meanwhile, UK imports from India were valued at £19.2 billion in the four quarters until the end of Q3 2022, marking a growth of £5.2 billion or 37.3 percent in current prices compared to the previous year’s four quarters.
Next round of UK-India free trade talks on April 24-28
On April 13, Prime Minister Rishi Sunak spoke with Prime Minister Narendra Modi and agreed to accelerate the process of resolving any “outstanding issues” in the FTA negotiations.
Meanwhile, the Commerce Ministry announced the dates for the next round of the FTA talks. It indicates that relations between the two countries remain calm despite reports of tensions resulting from the activities of Sikh separatists in London.
Digital trade and investor protection key issues for March round of talks
Nikkei Asia are reporting that 13 out of 26 policy areas have been closed, covering topics from goods and services to investments and IPR. Both sides have variously mentioned that the talks have enjoyed “good, positive” momentum. Now, British stakeholders are hoping that regulatory barriers are cleared to facilitate trade through digital services and digitally enabled services. However, a data bill is currently with India’s parliament and could impact the FTA negotiations. A recent UK-Japan free trade deal addressed data localization, customs duties on digital transmissions, and recognition of digital signatures. A deal with India could reference that template.
Other sticky issues include investor protections for British businesses, who seek early arbitration in case of disputes rather than get stuck in Indian courts. Further, UK demands for duty concessions on Scotch whisky and automobiles are still hitting a wall with India. Meanwhile, the corporate sector will be looking for progress on visa and mobility issues.
Foreign lawyers and international law firms can now practice in India
Among key issues for UK negotiators was getting India to approve legal practice for foreign lawyers and international firms in its jurisdiction. After several rounds of discussions, the Bar Council of India (BCI) announced the “BCI Rules for Registration and Regulation of Foreign Lawyers and Foreign Law Firms in India, 2022” on March 10.
Foreign lawyers and law firms can now practice foreign law, engage in international arbitration matters, and advise on international legal issues in non-litigious matters in India on the principle of reciprocity. Further, they can practice transactional and corporate work, such as joint ventures, mergers and acquisitions, intellectual property matters, and drafting contracts, among other related matters. However, they will not be allowed to appear before any courts, tribunals, or other statutory or regulatory authorities in India. If found guilty of misconduct, their registration in India will be cancelled.
It should be noted that the UK has claimed to have authorized Indian lawyers and law firms to establish offices in England and Wales, allowing them to practice Indian law, international law, and provide legal advice under English law. The Bar Council of India has stated that it will verify these claims and reciprocate accordingly.
Round 8 of FTA talks scheduled for March
Negotiations continue on a “forward-facing trade deal with India”, with the eighth round of India-UK FTA discussions set to take place in New Delhi [on hybrid mode] from March 20-24.
Trade ministers of both countries recently met on December 13, 2022, and January 27, 2023, to take stock of progress. India and the UK recorded trade “worth £34 billion to year end September 2022”.
Discussions have closed on 13 chapters of the trade agreement. There are 26 chapters in the proposed FTA deal, which include goods, services, investments, and intellectual property rights.
Top British fashion and beauty brands embark on first-of-it’s-kind trade mission to India
The UK Department for International Trade notified on February 27 that top UK brands will join India’s Fashion Forum 2023, the country’s largest fashion retail intelligence event. The British delegation will seek to tap into India’s rising demand for high-class beauty and fashion products.
British brands participating in the sales mission include cosmetics retailer Lush, luxury knitwear brand John Smedley, and fashion brands like Wormser, Organic Apoteke, Lilly and Sid, Legology, Benny Hancock, VENIA Cosmetic Ltd, Jennifer Young Ltd, and ByErim Ltd.
The trade mission, the first of its kind, is organized by the Department for Business and Trade to facilitate British brands in showcasing their expertise in luxury, heritage, and innovation to potential buyers and distributers.
India accounts for 1.7 percent of total UK exports and India was the 12th largest export market for the UK in the four quarters to the end of Q3 2022.
The UK Business and Trade Secretary Kemi Badenoch also expressed optimism about business and export trade prospects with India, saying: “India’s growing economy and middle class represent an enormous opportunity for enterprising UK companies looking for new markets.”
India is poised to become the third largest economy in the world by 2050, with a projected middle class cohort of 250 million consumers. According to luxury lifestyle magazine Robb Report India, in 2021, the Indian luxury goods market was valued at over US$5 billion, and expected to grow by another 10 percent over the next five years.
Seventh round of talks completed
The seventh round of India-UK FTA discussions took place in London from February 6-10. The Indian High Commission organized an investor showcase to highlight opportunities for UK businesses in India’s infrastructure and green mobility, among other sectors.
Technical discussions were held across 11 policy areas over 43 separate sessions.
UK wants a trade deal with India this year, but setting no clean deadlines
Speaking to The Times, UK Secretary of State for International Trade Kemi Badenoch discussed possible concessions on matters like business mobility but firmly rejected an FTA modelled on the country’s post-Brexit agreement with Australia.
The UK allows under-35s from Australia to live and work in the country – but is not interested in negotiating that kind of free movement with India. Badenoch made it a point to say, “We left the EU (European Union) because we didn’t believe in free movement, we didn’t think it was working.” She also said, “…what people from the UK want to do when they travel to Australia is probably slightly different from what they do when they travel to India, and vice versa as well.”
In January, India and the UK agreed to a reciprocal UK-India Young Professionals Scheme, which would annually offer visas to 3,000 graduates in the 18 to 30-year-old cohort to live and work in either country for up to two years. It would appear the British government does not intend to facilitate more.
Further, Badenoch is opposed to a deadline-bound negotiation process – favored by the previous Boris Johnson government – as either party could hold talks hostage by running down the clock. A deal this year would be good, but if things are not working out for either party, Sunak’s government could stand aside. Badenoch elaborated: “I do think a deal this year. I don’t know when. But after a while if things don’t conclude then people just move on, on both sides. I’m very keen to sign a deal this year.”
As per official UK government data, India-UK bilateral trade stood at around GBP 29.6 billion a year.
Sixth round of talks conclude
The sixth round of negotiations for the India-UK FTA concluded in December with detailed draft treaty discussions across 11 policy areas over 28 separate sessions.
Meanwhile, the India (Trade and Investment) All Party Parliamentary Group (APPG), backed by British Indian think tank 1928 Institute as its secretariat, will take its first delegation to India in April.
The seventh round of official-level negotiations is due to take place in early 2023.
Sixth round of FTA talks begin
UK Secretary of State for International Trade Kemi Badenoch is in New Delhi for the sixth round of India-UK Free Trade Agreement (FTA) talks with her Indian counterpart Piyush Goyal, starting Monday, December 12.
Trade in goods, including passenger vehicles, are among areas under discussion, which began January 13, 2022.
India received FDI worth US$1.64 billion in 2021-22. Between April 2000 and March 2022, India attracted US$32 billion in FDI.
Under PM Sunak, FTA talks to prioritize business interests
Unlike previously, the India-UK FTA negotiations under Sunak’s government will not be chasing a deadline.
As per Indian government officials speaking to the media, three-four chapters are currently being discussed for final completion. Chapters yet to be concluded involve intellectual property and goods.
Trade negotiators will begin their next round of talks in the coming months. Topics on the agenda include patent regime for pharmaceutical companies, work visas, and access to Indian movies. The UK wants reduction in the import duty on automobiles and scotch besides a separate chapter on financial services. UK negotiators are also keen to bring labor into the FTA’s ambit.
The UK does not seek a quick deal as they want to secure quality of provisions. Meanwhile, the Indian side is also being cautious given the inclusion of several non-trade related subjects in the FTA.
While India seeks a March 2023 conclusion to the deal, discussions on sticky issues in the next round of talks will determine whether this is possible.
Political situation in UK slows down momentum of FTA talks with India
India and the UK passed their Diwali deadline (October 24) for an FTA – as was set by PM Boris Johnson. While the trade deal has political backing on all sides, last mile negotiations have been stuck on issues linked to immigration, automobiles, intellectual property (IP), and the alcohol industry.
Moreover Johnson who had been plagued with political scandals had his term cut short and was followed by Liz Truss after she won a Conservative Party leadership contest that enabled her to fill the prime ministerial role. Truss had defeated Rishi Sunak, Chancellor in PM Johnson’s cabinet. PM Truss herself resigned on October 20, having lasted barely 44 days in office. Rishi Sunak subsequently became prime minister on October 25 as his bid for Conservative Party leadership went uncontested.
When Truss was in power, PM Narendra Modi’s government had reportedly sought an official visit to the UK in October. It is now more likely that FTA talks and official meetings will only pick up in 2023. Given the changed state of affairs, the Indian side is on ‘wait and watch‘ mode.
Sunak has mentioned in the past that an India-UK FTA would boost the financial services sector (prospects for fintech and insurance, for example) – something the city of London is entirely keen upon. However, the recent months has brought unprecedented economic pain to the UK with rising living costs and high energy bills.
The incoming PM Sunak will be looking at the trade treaty prospects much differently – and his cabinet will also add pressure. Suella Braverman has been appointed Home Secretary – she had resigned from PM Truss’s cabinet over the latter’s stance on immigration. Market access for professional services feature prominently on India’s expectations from an FTA with the UK.
Speaking to parliament about the status of the trade deal on October 26, Greg Hands, the UK trade department minister said: “We have already closed the majority of chapters and look forward to the next round of talks shortly.” The UK will only agree to a trade deal that is “fair and reciprocal”.
Key issues for India-UK FTA negotiators include liquor, automobiles, intellectual property, and mobility of students and professionals.
Fifth round of India-UK free trade negotiations
India and the UK concluded the fifth round of negotiations towards their free trade agreement (FTA), on July 29. Spread over two weeks, both sides maintain confidence in the status of their technical talks. As of September 5, India and UK trade negotiators reportedly completed discussions on 19 of the 26 chapters under the proposed FTA. As per officials speaking to the media, two chapters out of the remaining seven are expected to take longer to close discussions on – as they contain items of particular interest to either side. The sticky topics include liquor, automobiles, and intellectual property rights.
Both India and the UK are seriously working towards reaching a conclusion by the much talked Diwali deadline, as the new Prime Minister Liz Truss looks set to prioritize relations with India as part of her government’s foreign policy.
On a four-day official visit to India in September, Vincent Keaveny, the 693rd Lord Mayor representing the City of London, held meetings with leading Indian businesses, investors, and finance chiefs at the banking regulator Reserve Bank of India (RBI) and the Securities Exchange Board of India (SEBI). Keaveny is London’s ambassador for financial and professional services. Speaking to the media, Keaveny maintained careful optimism about the FTA’s tight deadline, saying: “Prime Minister Modi has made it clear that he wants to sign the FTA by Diwali. There are some outstanding issues to be resolved but I think there’s a lot of optimism on both sides that we will get that done. Whatever the content of the agreement, it will be a real positive for the relationship between India and the UK across the board in the coming years.”
The India-UK trade talks have been conducted in a hybrid manner – some teams met in New Delhi while a majority joined for virtual official talks. In addition, technical experts from both sides came together for detailed draft treaty text discussions in 85 separate sessions covering 15 policy areas.
Further, the UK parliament has set up the cross-party panel – ‘India (Trade and Investment) All Party Parliamentary Group (APPG)’ – to promote trade and investment between India and the UK. APPG will support the ongoing FTA negotiations and its goals once the trade treaty is signed.
What are the next steps?
India’s trade negotiators are expected to visit London sometime at the end of September or early October, with anticipated delays as the new British government settles in. Both countries hope to sign a comprehensive and balanced FTA by the end of October.
Unlike traditional FTAs, the final India-UK trade deal will cover a wider range of areas, including gender, labor, trade and development, corruption, and MSMEs.
The two countries have also set up committees to discuss a totalization agreement sought by New Delhi, which will ease the social security compliance burden on Indian IT companies and remove dual social security taxation. India also wants market access to the UK legal services sector. It bears knowing that services trade accounts for 60 percent of overall annual commerce between India and the UK.
While there has been some instability in UK politics and government, with Prime Minister Boris Johnson stepping down in July, followed by a party leadership contest to replace him, the India-UK trade talks continued undeterred, also confirmed by Indian commerce secretary B.V.R.Subrahmanyam. Intensive FTA discussions were scheduled throughout the summer.
In India, export representative and industry stakeholders have been organizing discussions to provide actionable inputs to the government so that the FTA is mutually beneficial to both countries.
What’s at stake
The UK is keen to gain India market access for transport equipment, electrical equipment, medical devices, chemicals, motor vehicles and parts, wines, Scotch, and spirits, some fruits and vegetables – which could impact local industry players and/or boost the manufacturing ecosystem. On its part, India wants to increase exports of textiles, food and beverages, pharmaceuticals, tobacco, leather and footwear, and agricultural items like rice – to the UK. Digital services and ICT sectors will also benefit and drive the expansion of bilateral trade under the FTA.
The Russian invasion of Ukraine has delivered many curveballs, and major economies in the Western sphere have been particularly hit due to their position on Moscow’s activities and imposition of sanctions. In Q1, as per data from the UK Office of National Statistics, petroleum products dominated Indian exports to the UK with shipments worth £888 million. The upcoming FTA could unlock further expansion of Indian exports of refined petroleum products.
What were the technical areas covered in Round 5 talks?
As part of their latest round of talks, India and the UK signed agreements in the fields of education and nursing on July 21, 2022. These will ease short-term mobility for professionals and create employment opportunities.
India is the 10th largest service trade partner to the UK.
Recognition of academic qualifications
Mutual recognition of academic qualifications and duration of study in recognized and approved higher educational institutions in both countries will ease movement of professionals across the two markets (see UK government document here).
For example, Indian senior secondary school and pre-university certificates will be recognized for entry into the UK’s higher educational institutions. However, the MoU on education does not cover professional degrees, such as engineering and medicine.
MoU on maritime education
The memorandum of understanding (MoU) in maritime education will ensure mutual recognition of certificates of “maritime education and training, competency and endorsements of seafarers issued by each side”. India is among the top suppliers of seafarers in the world, and this India-UK MoU opens job prospects in the British shipping sector (see UK government documents here).
Recruitment for British healthcare sector
Recruitment of Indian nursing and allied health professionals for the UK healthcare sector will benefit from the Framework Agreement on Healthcare Workforce (see UK government documents here).
India-UK trade and investment profile
As per UK government data, released August 18, 2023:
- Over the course of the four quarters leading up to the end of Q1 2023, the aggregate trade value in goods and services, encompassing both exports and imports, stood at £36.3 billion between the UK and India. This marks a substantial increase of 34.2 percent, equivalent to £9.2 billion in current prices, compared to the four quarters ending Q1 2022.
Breaking this down:
- The cumulative worth of goods and services exported by the UK to India reached £14.7 billion during the four quarters ending Q1 2023. This represents a noteworthy surge of 44.2 percent, translating to £4.5 billion in current prices, in contrast to the four quarters ending Q1 2022.
- The collective value of goods and services imported by the UK from India amounted to £21.6 billion during the four quarters concluding Q1 2023. This signifies a significant increase of 28 percent, equating to £4.7 billion in current prices, compared to the four quarters ending Q1 2022.
In comparison, the aggregate trade value in goods and services, encompassing both exports and imports, reached £107.5 billion between the UK and China during the four quarters ending Q1 2023. This indicates a growth of 11.3 percent, equivalent to £10.9 billion in current prices, compared with the four quarters ending Q1 2022.
India ranked as the UK’s 12th largest trading partner in the four quarters to the end of Q1 2023,
accounting for 2.1 percent of total UK trade.
In terms of foreign direct investment (FDI), in 2021, the UK had an outward FDI stock of £19.1 billion in India, accounting for 1.1 percent of the total UK outward FDI stock. Conversely, the inward FDI stock in the UK from India in 2021 was £9.3 billion, representing 0.5 percent of the total UK inward FDI stock.
It is hoped that following their FTA, India and the UK can broaden the scope of bilateral trade. The goal is to boost bilateral trade in goods and services to US$100 billion by 2030.
About 70 percent of India-UK trade is dominated by the services sector, as per reporting by the Financial Express. The proposed India-UK FTA would ultimately cover 90 percent of tariff lines.
This article was originally published August 22, 2022. It was last updated January 10, 2024.
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