India, UK unlikely to finalise Free Trade Agreement before 2023

Published on Oct 20, 2022 11:50 PM IST

The Indian side has firmed up its stance on key issues such as mobility of professionals and students and automobiles and indicated it will not budge on these matters, people familiar with the talks said

Turmoil in UK government after Liz Truss’s resignation from the PM’s post is adding to the delay. (AP)
Turmoil in UK government after Liz Truss’s resignation from the PM’s post is adding to the delay. (AP)
ByRezaul H Laskar and Rajeev Jayaswal

India and the UK are unlikely to finalise a trade deal before 2023, largely because of the political turmoil in Britain and differences within the outgoing Liz Truss (she resigned Thursday) government on issues such as mobility of professionals and immigration, people familiar with the negotiations said.

Though both sides continue to be engaged in negotiations for the free trade agreement (FTA), it is now becoming increasingly clear the earlier deadline of finalising the deal by Diwali will not be met, the people said. The Indian side has firmed up its stance on key issues such as mobility of professionals and students and automobiles and indicated it will not budge on these matters, they added.

The bigger problem at the moment, the people pointed out, is the turmoil within the British government following the resignation of Truss. On Wednesday, interior minister Suella Braverman quit, becoming the second senior minister to depart in less than a week, after former finance minister Kwasi Kwarteng was sacked.

“The signing off on the FTA is not expected till next year. At best, there could be some sort of announcement this month,” one of the people cited above said, declining to go into details.

The Conservative Party government is facing problems in striking a balance between its promise to counter immigration following Britain’s exit from the European Union (EU) and the need to facilitate the mobility of overseas professionals and students. Braverman’s remarks that the FTA would increase immigration from India didn’t go down well in New Delhi.

The two countries are also yet to agree on a few contentious issues that are key for a comprehensive FTA, a second person said.

“Gone are the days when India was desperate to sign a bilateral or multilateral trade deal because of fears of being left out. India signs FTAs from a position of strength. Deals with Australia and the United Arab Emirates are testimony to this. India is not desperate, which was proven when Prime Minister Narendra Modi decided to quit the Regional Comprehensive Economic Partnership (RCEP), one of the largest trading blocs, at the eleventh hour because it was not good for India and was majorly benefiting a neighbouring country,” the second person said.

“India and the UK are still negotiating some issues pertaining to automobiles, liquor tariffs and mobility. A few months more will not make any difference,” the person said, adding it is always good to ink a deal with a stable and confident government.

A spokesperson for India’s commerce ministry said: “The government of India is committed to work with the government of the UK on all issues of interest in the negotiations for the FTA. It would not be appropriate, given that the negotiations are underway, to comment on timelines or on any issue that is under discussion between the two countries.”

The spokesperson said India’s approach has been to “arrive at a mutually beneficial outcome which boosts economic growth and creates jobs”.

Modi decided in November 2019 to exit the RCEP, hours before the agreement was finalised by 15 other countries. RCEP covers about 30% of the world’s population and accounts for $12.7 trillion in trade in goods and services, or a little over a quarter of global trade. Its members are the 10 Asean countries and Australia, China, Japan, New Zealand and South Korea.

India is currently the world’s fastest growing economy and has already surpassed the UK to become the fifth largest economy. All major economies, including trade blocs such as RCEP, are keen to join hands with India because of its democratic values and rules-based trading system, the people said. But India will sign trade deals only when they are good for its people.

“There is no hurry. Deadlines in such matters are not sacrosanct when it involves the national interest,” the second person said.

Trade experts acknowledged that Braverman’s comments had impacted the trade talks. Commerce secretary Sunil Barthwal told reporters on the sidelines of the CII National Exports Summit on Thursday that negotiations are still on and an agreement would be reached soon, though his remarks were qualitatively different from comments by his predecessor BVR Subrahmanyam, who retired last month. Subrahmanyam had said on September 3 that the “Diwali deadline is not going to be missed”.

Ajay Sahai, director general and chief executive of the Federation of Indian Export Organisations (FIEO) said: “With the rising political and economic uncertainties in UK, the earlier decided timelines for finalising the FTA may not be adhered to as priority of the country may change. However, there is no question mark on FTA, which is mutually beneficial to both economies. The consensus and consultations are the hallmark of the two leading democracies and few complex left over issues will be resolved through this process amicably.”

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