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BW Businessworld

Indo-British FTA: Diwali Deadline No Longer Valid, Say Experts

This free trade agreement would be vital for India as it will enhance exports of large sectors such as textiles, leather goods, and footwear, which would increase employment opportunities, experts noted

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Time and again Union Commerce Minister Piyush Goyal has said both the United Kingdom (UK) and India are working toward the Diwali deadline for the free trade agreement (FTA). 

However, according to several media reports, the trade deal between two nations is on the "verge of collapse" amidst Indian ministers' reaction to Home Secretary Suella Braverman's criticism of migrants policy.

Braverman, recently said that she had "concerns'' about the deal as it will increase the migration to Britain and Indians represented the largest group of visa overstayers.

Interestingly, while addressing a Diwali event organised by UK-based India Global Forum (IGF) in London, Braverman has said that Britain is keen to seal a trade deal with India to boost the economies of both countries.

In an apparent effort to override her recent controversial statement, she also added the UK is out of Brexit and has no Eurocentric mindset towards trade or visas. She said that British villages, cities and towns have been “profoundly enriched by immigration from India”.

In August, the Ministry of Commerce and  Industry in a statement said that India and UK concluded the fifth round of talks for the India-UK FTA. 

“Indian and UK officials will continue to work intensively throughout the summer towards our target to conclude the majority of talks on a comprehensive and balanced Free Trade Agreement by the end of October 2022,” the statement read.

As the Diwali deadline seems to be out of hand now, BW Businessworld spoke to experts to know how India and the UK can secure a beneficial trade deal amid the recent controversy. 

"Both sides are of the view that the October (Diwali) deadline would lead to a less comprehensive deal than expected. This will leave key points left open for future negotiations. The UK stance was not to sacrifice quality for speed as it wants to improve the current trading relationship and thus is ready to wait for negotiating an ambitious free trade agreement," said Sharad Chandra Shukla, Director, Mehta Equities. 

According to the industry leaders, Britain needs the FTA deal more than India as it is struggling with its own economy and the markets are not in control. Hence, a partnership with India — the fastest-growing economy — will ultimately help Britain. 

"Both governments should continue to seek ways to improve the current trading relationship as rapid progress on FTA will demonstrate the efforts made by the national leaders of both countries in shaping it. Apart from maturing the bilateral enhanced trade partnership (ETP), the agreement should also remove market access barriers to help increase the flow of goods, services, capital, technology and people between the two countries," said Saket Dalmia, President, PHD Chamber of Commerce and Industry.  

Notably, India and the UK have emerged as key players in the multilateral trading system and eagerly strengthening their trade relations. Also, the FTA between the two countries aims to address bilateral issues in order to build a stronger framework for trade and investments. 

"The trade deal will enable UK and Indian enterprises to benefit from lower trade costs, enhancing economic activity in both nations, as India is predicted to have the third-largest economy in the world by 2050," said Adarsh Sharma, Managing Director, Primus Partners. 

Sharma said that the agreement between the UK and India offers a chance to strengthen our existing robust trade relationship, which is worth GBP 24.3 billion annually and will help businesses and sectors all across our two countries. 

The Way Forward
Talking about the Diwali deadline, experts agreed that if both sides chase this tight timeframe, many important sectors will be left open for future negotiations. 

"India is in a better position for signing the India-UK free trade agreement. The Indian government has to just patiently wait. Trying to fast track the negotiation the bargaining position India has for getting the deal will be seen as a sign of weakness," said Shukla. 

In the last 10 years, India's exports to the UK have grown from 7 per cent to 10 per cent of the total exports. In the same period, India's imports increased from 5 per cent to 7 per cent. 

The current FTA is targeted at doubling bilateral trade between India and the UK in the next 10 years. An FTA with the UK would increase India's exports of textiles, leather, jewellery, and other goods. 

"The India-UK FTA is a critical step for the UK to lessen its reliance on the EU and forge independent commercial relations outside of the EU in the post-Brexit future. India, on the other hand, can benefit from this chance to further the ‘Make in India’ initiative and seal strategic agreements in the fields of defence, cyber security, research and development, and health care, where the UK has traditionally been a major player," said Sharma. 

While talking about the benefits, Dalmia said that the deal is expected to provide certainty, predictability, and transparency, as well as to create a more bilaterally facilitative and competitive services regime.

Experts also said that by addressing market issues and removing trade barriers on both sides, FTA is expected to expand sectors and corporations while increasing exports.

"If the agreement is signed, UK beverage, wine, spirits, fruits (e.g., apple, pear), and automobile exporters can expect expanded access to the Indian market. In turn, Indian businesses would benefit significantly by greater access to the UK market in ICT, financial services, food and beverage, and pharmaceuticals," said Dalmia. 

If The Deal Fails
While talking about the consequences if this deal fails, Shukla said, "There is a clear benefit for both sides. But, the deal's failure will have greater consequences on the UK as there is a high probability of facing recession in the near future. The UK cannot afford to let go of this deal."

On the other hand, Sharma said that the statement by the British home secretary can’t be necessarily considered a setback, but more conservative noises that are more internal to UK politics. 

"The maturity of the bilateral relationship is above all the noise. India’s expression of its displeasure is quite natural. The conversations are progressing well," said Sharma.

Reportedly, the statement from the Home Secretary has upset Indian officials; however, India is still keen to take forward the deal as this will provide opportunities for many people in both countries, experts added.