Will this agreement be reached between India and Britain with the arrival of Rishi Sunak?

Zubair Ahmed, BBC correspondent

India consumes the most alcohol in the world, and Scotch whiskey from Scotland is a favorite here. Obviously there is a lot of demand for it. But seeing the heavy price tags in its bottles, many customers prefer to drink cheap liquor made in the country.

But if a Free Trade Agreement (FTA) is signed between India and Britain, it is quite possible that their price in India will drop significantly.

On Thursday, there was a phone conversation between the Prime Minister of India, Narendra Modi and the Prime Minister of Britain, Rishi Sunak. The emphasis was on early agreement on FTA between the two countries. Prime Minister Modi himself gave this information in a tweet.

delay in agreement

The signing of the FTA between India and the UK was to take place this Diwali but it is getting delayed due to political and economic uncertainty in the UK.

Another reason for the delay was British Interior Minister Suella Braverman’s concerns about the FTA. In the first week of October, Suella Braverman had said that the trade deal with India could increase the number of Indians coming to Britain and it could also harm the purpose of Brexit.

Indian-origin Suela also said that most Indian expatriates remain after their visa expires in the UK.

There were sharp reactions in India on this statement of Suella. He had resigned, but after becoming the Prime Minister, Rishi Sunak made Suela again the Home Minister. Prime Minister Rishi Sunak wants the trade deal with India to be executed at the earliest.

Five rounds of talks have been held between the two countries, but when the next round will be held has not been decided yet. In the last round of talks, Britain’s effort was to reduce the 150 percent import duty imposed by India on Scotch whiskey to 20 percent under this agreement. India does not agree with this.

If the Indian government fulfills this demand of the British government, then the world famous whiskey industry of Scotland will be jammed and celebrated. According to Harmeet Singh Ahuja, Scotland will be happy with this.

Scottish traders expect exports to India to grow to a billion pounds in five years.

What is a Free Trade Agreement?

But FTA is not just a process to eliminate or reduce the import duty on liquor or any other item.

It is a comprehensive agreement between two or more countries, whereby customs and non-tariff barriers on many items of trade are eliminated or significantly reduced.

This increases bilateral trade and both sides strengthen each other’s economy. FTAs generally include goods and services, intellectual property rights and investments, etc.

India has signed FTAs ​​with UAE and Australia this year. Under this, the import tariff is likely to be reduced by 85 percent. Apart from this, India has FTA agreements with many other countries like Malaysia, Japan, Nepal, Bhutan, Sri Lanka and ASEAN countries.

Britain has also entered into FTA agreements with Australia and New Zealand this year. After leaving the European Union, Britain is trying to sign FTAs ​​with many countries to boost its economy, especially with India.

In March this year, India’s economy surpassed that of the UK to become the fifth largest economy in the world with a net worth of $3.1 trillion. India is a developing economy, with the potential for massive growth that would require massive foreign investment.

The growth rate of India’s economy is the highest among all the major economies of the world and it will remain so for years. That is why countries around the world have a desire to enter into special trade agreements with India, including Britain.

What is India UK Trade Agreement?

In May 2021, Prime Minister Narendra Modi and his then UK counterpart Boris Johnson announced an “enhanced trade partnership” as the first phase of a potentially comprehensive free trade agreement. Since then five rounds of talks have been completed and now they are in the final stages.

Britain’s wine merchants say that trouble comes only in the final stages, not in the early stages. One of his statements said the first phase of trade negotiations is often the easy part. “The trickiest matter is left till the end. So the real scale of the challenge may take some time to become clear”

In the fifth round in August, technical experts from both sides came together for detailed draft treaty text discussions in 85 separate sessions covering 15 policy areas. India and Britain started talks for a free trade agreement in Delhi in January 2022.

India and UK both have wish lists and they can prove to be a big hurdle in reaching the last line.

Britain wants India to give it more participation in the manufacturing and services industries under this agreement. But these are two areas in which India has traditionally opposed foreign participation.

Economists believe that India will not be easily prepared to remove the protection provided by trade barriers for domestic industries and workers. For example, one may think about the interests of whiskey workers in India and therefore hesitate to reduce import duties. There is also pressure on India not to reduce the duty of country liquor manufacturers.

If India reduces import duties, India will have to make concessions in return. Britain may face pressure to allow Indian products such as medicines to enter the British market. It may be forced to issue more visas to Indian workers

Under the new post-Brexit immigration regime, more than 60,000 Indians received skilled worker visas last year, and the number will increase significantly after the FTA.

Will Britain be ready for this? Amitendu Palit of the National University of Singapore, formerly in India’s finance ministry, tells the BBC that the UK will need to go further, allowing more Indian professionals to stay in the UK longer.

Harmeet Singh, CEO of Sun Mark, a UK-based food and beverages import and export company, says, “Since we left the European Union, the country lacks skills, the UK is short of labor and India has a willing job. who are willing to come here temporarily to contribute to our country and we should accept it.Also we should urge the Indian government to give rules to people who stay longer than visa Ask to follow.”

The UK is looking to gain access to Indian markets for transport equipment, electric equipment, medicine, chemicals, motor vehicles and parts, wine, Scotch, spirits and some fruits and vegetables – which the Indian side says could affect local industry players. could

India, on its part, wants to increase exports of agricultural commodities such as textiles, food and beverages, pharmaceuticals, tobacco, leather, footwear and rice to Britain. Britain says the deal will almost double UK exports to India and increase annual trade between the two countries to £28 billion by 2035.

Who benefits more from this agreement?

According to Harmeet Singh Ahuja, it is difficult to answer this question at the moment. “Whether it’s going to be more beneficial to the UK or India is almost impossible to answer because we don’t know what’s in the FTA agreement at the moment. Ultimately both countries feel they have at least everything in common. getting it, eventually it will be a win-win situation for both of them”

It is being said that India’s approach towards FTAs ​​is that it should be fair and balanced and focus more on cooperation rather than competition. But experts say that it will not be so easy. According to him there is a need for a balanced approach towards business, which means that even though foreign brands will be increasingly available in the Indian markets, their presence should not jeopardize the small and medium domestic brands of various goods in India.

India hopes that the British Government’s Department of International Trade has prepared a strategic document on the proposed FTA with India.

It clearly states that Britain should benefit from this. The document reads, “FTAs with India need to work for the UK. It is clear that any trade agreement with India must prove to be true for UK consumers, producers and businesses. We are committed to maintaining our high environmental, labor, food safety and animal welfare standards in the trade agreement.”

In any business deal with the UK, India’s priority will be to get relief in visa rules for Indian students and professionals. Britain sees a trade deal with India as a golden opportunity. On the other hand, India wants Indians to have more opportunities to work and live in Britain.

Britain expects that if the agreement is reached, India will become a major buyer of Britain’s green technology and British services.

But in the eyes of UK exporter Harmeet Singh Ahuja, tariffs are not always the most important thing in free trade which he says, “Free trade will certainly make imports and exports cheaper in the countries concerned but what really matters is ease of doing business.

Will the two countries really make it easier to do business with each other? Will the environment be eased for some bureaucracy, paper work, capital flows? Will both countries accept each other’s qualifications or certification by professional bodies? It is more important to me not to reduce the rate of duty.”

His experience himself has not been positive, as he himself explains, “I have always found the process difficult after importing from India instead of exporting to India. But some of it has improved in recent times. So I think we have to talk about non-trade barriers.”

When can the agreement be signed?

In Britain, opposition Labor MP Tanmanjit Singh Dhesi, speaking to the BBC, said that ‘we are far away from the FTA at the moment’.

He says, “We have been promised a lot. First Boris Johnson promised, Rishi promised in his capacity as finance minister. Everyone said that after Brexit, there will be FTAs ​​with America and India at the earliest but something happened. No. If we look at the statements that are coming this month, it seems that we were promised this, the promise made by Boris Johnson and Rishi Sunak that the trade deal will be sealed by Diwali, nothing happened “

In his tweet on Thursday, Prime Minister Modi expressed hope that the FTA will be settled soon. India’s Industry Minister Piyush Goyal recently said that both the parties are committed to seal the agreement. It is clear that both the countries are not working on any deadline. The date of the final round of talks has also not been shared.

Harmeet Singh Ahuja argues that the deal should be done immediately, later there will be shortcomings in it, they can be overcome.

He says, “We should not think that the trade agreement is the end, it is the first step in a series of closer cooperation and duplication between the two countries. I think the sooner we sign it the better.”

“Of course this will need to change over time. We start early, we start taking it easy and the first day is better than the last. From there we can move on and see how to improve further. We must not slow down the process in our pursuit of perfection.”

Economists say an interim agreement could be reached by early next year if both sides agree to make concessions.