India and the UK have resumed Free Trade Agreement (FTA) talks after an eight-month pause. Commerce and Industry Minister Piyush Goyal and UK Trade Secretary Jonathan Reynolds discussed a “mutually beneficial” deal to triple bilateral trade by addressing tariff and non-tariff barriers.
India seeks easier business mobility, while the UK wants tariff cuts on Scotch whisky, EVs, and financial sector access. India-UK bilateral trade reached US$ 21.34 billion in 2023-24. The UK ranks as India’s sixth-largest investor, contributing US$ 35.3 billion in foreign direct investment between April 2000 and September 2024.
Negotiations on a Free Trade Agreement (FTA) between India and the United Kingdom resumed on Monday 24th Feb after an eight-month hiatus. UK Secretary of State for Business and Trade, Jonathan Reynolds, met with India’s Commerce and Industry Minister, Piyush Goyal, in New Delhi to discuss the progress of the deal.
Both sides are working towards a “mutually beneficial and forward-looking” agreement to triple bilateral merchandise trade by resolving tariff and non-tariff barriers while respecting each other’s “sensitivities,” the ministers of both nations said.
Describing the proposed deal as “pathbreaking,” Mr. Goyal emphasized its potential to rapidly expand trade in goods, possibly two to three times in the coming years.
However, he refrained from committing to a specific timeline, stating that the long-term benefits of such an agreement outweigh the urgency of immediate finalization.
He said, “One has to crystal gaze may be 20-30-50 years into the future and make a robust agreement which is a win-win situation for both sides and therefore neither should we rush into things, but it’s always to conclude fast. So, we will have speed but not haste.”
Mr. Reynolds reaffirmed the UK’s commitment to the FTA, calling it a “top priority” and stressing that such agreements are designed to strengthen economic ties for the future.
The agreement, which is in its advanced stages, aims to significantly boost bilateral trade between the two nations within the next decade.
According to CIM Piyush Goyal, “an FTA deal will give huge opportunities to businesses and people to grow in both countries, and that the deal would help to boost bilateral merchandise trade between the two countries from the current US$ 20 billion to probably two or 3X in the next 10 years.”
Bilateral trade between India and the UK increased from US$20.36 billion in 2022-23 to US$21.34 billion in 2023-24. According to the latest data, from April to November 2024, India’s exports to the UK grew by 15.58% reaching US$ 9.60 billion, up from US$ 8.30 billion in the same period of 2023. Mineral fuels, machinery, and precious stones, pharmaceuticals, apparels, iron and steel and chemicals lead India’s export basket to the UK. (However, India’s import from UK declined by 2.21%, from USUS$ 5.55 Billion in Apr-Nov 2023 to USUS$ 5.42 billion in Apr-Nov 2024.)
The UK is also India’s sixth-largest investor, with Foreign Direct Investment (FDI) inflows reaching US$35.3 billion between April 2000 and September 2024.
India-UK FTA talks
India and the UK began Free Trade Agreement (FTA) negotiations on January 13, 2022. While the talks initially moved swiftly, they were paused after the 14th round due to UK elections and a change in government. The discussions faced hurdles over key issues, including India’s high tariffs on automobiles and Scotch whisky, as well as the UK’s concerns about immigration policies.
CIM Goyal said that India charges high tariffs on some items to protect its businesses and industries from unfair trade practices. He said, India’s tariffs are primarily designed to protect against non-market economies, non-transparent economies or economies known for predatory pricing or dumping of goods.
On Monday, the two ministers stated that tariffs on specific items could be negotiated for mutual benefit and clarified that the proposed FTA does not cover immigration.
The CIM said that India was open to reducing tariffs bilaterally under the proposed FTA with the UK for mutual gain.
“Between the United Kingdom and India, we are much more flexible. The two countries can significantly reduce tariffs to make business more competitive,” he said.
CIM Goyal also said, “there was some misunderstanding along the way because, in his six years of negotiating FTAs with several countries, immigration has never been a part of the trade deal. India has never, ever discussed immigration in any free trade agreement negotiations.”
He stated that immigration and business mobility are two different things.
Mr. Jonathan Reynolds, British business and trade secretary, said: “We welcome the huge and important relationship we have with people from India coming to the UK, where that’s the study, where that is to be part of businesses. And, obviously, business mobility is a separate issue to immigration.”
However, they agreed to further ease visa regulations for business mobility to strengthen bilateral trade and investment.
During the negotiations, India has focused on securing easier business mobility for the services sector, while the UK has sought significant cuts in import duties on Scotch whisky, electric vehicles, lamb meat, chocolates, and other confectionery items. The UK is also seeking access to India’s telecommunications, banking, insurance, legal, and financial services sectors.
CIM Goyal also informed that, along with the FTA negotiations, both partners would also be negotiating a bilateral investment treaty (BIT) and the Double Taxation Avoidance Agreement. All three are being negotiated concurrently.
