India-UK FTA in a likely impasse at final stages

According to The Daily Telegraph’s report yesterday, the Free Trade Agreement (FTA) between India and the UK might have come into an impasse at its final stages. Data localisation (to prevent foreign companies taking data out of India) and UK companies being allowed to bid for Indian government contracts are among the issues causing the possible deadlock.

“The stumbling blocks are absolutely to do with digital. How ambitious and comprehensive this deal is is in some way a function of time,” the newspaper quoted an “insider” as saying.

UK Trade Secretary Kemi Badenoch indicated earlier this week that just because there may be an FTA struck with India, it did not mean “we can’t do even more later”. The Department for International Trade (DIT) also said that the FTA would be agreed only if it meets the UK’s interests.

“It now appears likely that the prospective UK-India FTA under the Liz Truss government will not be as substantive nor as comprehensive as envisaged by the previous Boris Johnson government, as negotiations on key issues of mobility/migration and tariffs can be expected to continue towards a non-time bound second-phase of the agreement,” said Rahul Roy-Chaudhury, Senior Fellow for South Asia at the London-based International Institute for Strategic Studies (IISS) think tank.

“Negotiations on key issues of mobility/migration and tariffs can be expected to continue towards a non-time bound second-phase of the agreement. But, it will still enable both governments to claim political victory, even though its economic impact may be underwhelming for both,” he said.

The governing Conservative Party in the UK has been thrown into turmoil and Liz Truss, is believed to be very keen to score her big win by clinching a trade deal with one of the world’s fastest growing economies – a process she had initiated as former trade secretary. Plus, the Queen’s demise has also had UK towards the lighter side of trade activity, even though Piyush Goyal (Minister for Commerce and Trade) said that both the countries are working towards putting pen to paper by Diwali this year.

The focus of the FTA negotiations is on reducing the barriers to trade, cutting tariffs, and supporting easier imports and exports into each other’s markets. India’s FTA with UK may bargain a range of products and services from textiles to alcohol, automobiles, pharmaceuticals as well as subjects like labour movement, intellectual property enforcement and data protection.

According to official UK government data, India-UK bilateral trade currently stands at around GBP 24.3 billion a year and the aim is for that to be at least doubled by 2030.

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