Last reviewed 10 February 2022
Negotiations on a Free Trade Agreement (FTA) with India were launched in January 2022, with a first round already concluded by the end of the month.
Both parties want to conclude negotiations by the end of 2022 and an Interim Agreement will be considered to deliver early benefits for both countries. The UK and India had already committed in May 2021 to an Enhanced Trade Partnership which could double trade by 2030.
With this FTA, the UK hopes to boost total trade by up to £28 billion a year by 2035 and increase wages by up to £3 billion across the UK. India is one of the world’s biggest and fastest growing economies, set to become the world’s third biggest economy by 2050 and with a growing middle class forecast to increase to 250 million consumers by 2050.
The UK wants an agreement that removes barriers to doing business and trading with India’s £2 trillion economy and market of 1.4 billion consumers. This includes cutting tariffs on exports across numerous industries from food and drink to services and cars.
Tilt towards the Indo-Pacific
The move is in line with the UK’s strategy to refocus trade on the Indo-Pacific, an area representing over 40% of global GDP and containing some of the world’s fastest growing economies. An agreement with India would complement the UK’s other commitments in the region, such as trade agreements with Australia and New Zealand and ongoing negotiations with the 11 member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Benefits of a UK-India FTA
The UK believes the benefits will include the following.
Helping to double trade with India by 2030, building on the trading relationship which totalled over £23 billion in 2019.
Reduced barriers to trade in goods. Trade will be made easier and cheaper for UK exporters while improving choice and value for UK consumers. Removal of India’s tariffs on imports would save British companies money and increase the competitiveness of UK products. UK exports such as Scotch whisky and cars currently face duties of 150% and 125% respectively. The removal of tariffs and the provision of greater legal certainty by an FTA would support UK businesses in industries keen to export to India such as the automotive, agri-food, machinery and pharmaceutical industries.
Increased opportunities for UK services and investment.
Supporting innovation and trade in a digital era. An FTA presents an opportunity for British and Indian businesses to pioneer innovative commercial ventures in fields such as emerging tech, artificial intelligence, and cybersecurity
More jobs for UK workers. International investment from Indian companies already supports 95,000 jobs across the UK and this could increase with a new trade deal.
Helping small and medium-sized enterprises. SMEs in particular stand to benefit from the increased transparency and reduced costs an FTA could provide while lower importing costs would lead to the further growth of businesses of all sizes across the UK.
Boost to the UK’s green industries. The Indian Government is planning to install 175 GW of renewable energy capacity by 2022 and more in the coming decades. The UK’s renewables industry would benefit from a deal that removed barriers such as import tariffs as high as 15% on wind turbine parts from the UK.
Areas to be covered
Policy areas that have already been covered in discussions in the trade talks include trade in goods, trade in services including financial services and telecommunications, investment, intellectual property, customs and trade facilitation, sanitary and phytosanitary measures, technical barriers to trade, competition, gender, government procurement, SMEs, sustainability, transparency, trade and development, geographical indicators and digital.