[Answered] “There are good economic and strategic reasons for an India UK FTA that will spell many opportunities for both countries”. Critically examine the statement.

The directive Critically Examine demands both positive and critical aspects of the topic in question.
Introduction: Write a brief note on the India-UK FTA.  
Body: Write few points on positives aspects of India UK FTA. Write down few negatives of India UK FTA. 
Conclusion: Write is brief note of suggestions towards a better FTA between India and UK.  

India and the UK have launched the formal Free Trade Agreement negotiations, that is envisaged to conclude by the end of 2022. Both countries have agreed to conclude an Early Harvest Agreement (an Interim trade agreement) by mid 2022.  

This FTA could create many opportunities for both countries: 

  • Increased economic cooperation  
    • The UK and India had bilateral trade of $ 23 Bn in 2019. The FTA could help achieve the target to double the Figure by 2030 as envisaged under “Roadmap 2030” by both countries. 
  • Increased Employment through investment 
    • India is the 2nd largest investor in the UK, While the UK’s investment in India provides close to half a million jobs in India. This number is set to increase with the FTA. 
  • Market for UK’s goods and services and skilled labor access for India. 
    • The FTA will provide the UK freer access to 5th largest economy and 1.4 Bn people especially in post BREXIT times. 
    • India skilled labor force will get better access to the high-tech market of the UK. 
  • Maintaining regional balance 
    • The global Centre of gravity is shifting towards the Indo-Pacific region, the UK wants greater cooperation with India which is a natural ally in the region. 
    • India which envisages a free, open and inclusive Indo-pacific, can use the cooperation of a like-minded country like the UK, in countering the assertive nature of China in the region. 
  • Strategic advantage and Defense cooperation 
    • Close cooperation with UK, a permanent member of UNSC, could support India’s aspiration of a permanent seat at the UNSC. 
    • India-UK cooperation, along with other like-minded countries, could help India counter the growing Russia-China-Pakistan axis. 
    • The UK could help strengthen India’s domestic defense manufacturing capacity.  

However, there are many challenges that need to be addressed 

  • Delay in finalizing FTAs. For example, India-EU FTA has been stuck for over a decade. Now, both countries are looking to finalise interim or early harvest trade agreement, which has not been transformed into comprehensive FTAs in the past. For example, India, in 2004, signed an interim trade agreement with Thailand to reduce tariffs, but it never converted into full-fledged FTA.  
  • Furthermore, WTO rules only permit full-fledged FTAs. Thus, it can be challenged in WTO by other countries.  
  • The balance of trade in almost all FTAs has been adverse to India. It is because India has not been able to exploit export opportunities using FTAs. 
  • The bitter past of British colonialism in India creates a psychological barrier between the countries. 
  • The UK’s perceived tilt towards Pakistan and its efforts to make China the anchor of post-Brexit economic policy can hamper the negotiations. 
  • India’s complex business environment and the UK’s strict immigration laws can create road blocks. 
  • The UK’s interference in internal matters like Kashmir and farmer’s agitation creates friction in the bilateral relations. 

India and the UK need to move swiftly to conclude the FTA, while avoiding sensitive matters. The 1.5 Mn strong Indian diaspora in the UK could be utilized to create a more conducive environment for the negotiations.  

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