Negotiations between India and the UK on the Free Trade Agreement (FTA) are seen to continue even with the Labour Party ousting the Conservative Party in the UK elections. However, there could be a revisit of some provisions including rules of origin, visas for skilled workers and environment issues based on the new government’s priorities.
Labour Party leader Sir Keir Starmer is now likely to take over from Rishi Sunak as the new Prime Minsiter of the UK.
Starmer has previously underlined the Labour Party’s changed stance and underlined his party’s India outlook at the India Global Forum last year. “What my Labour government will seek with India is a relationship based on our shared values of democracy and aspiration,” he had said.
The Labour Party in its manifesto had also said that it would “seek a new strategic partnership with India, including a free trade agreement, as well as deepening co-operation in areas like security, education, technology and climate change.”
India and the UK launched negotiations for an FTA in January 2022 and 14 rounds of negotiations have already been held with an official delegation from India even visiting the UK during the General Elections in India to keep the momentum going. Both countries have been keen on a successful conclusion to the negotiations and Indian officials have in the past indicated that there are very few pending issues left to be addressed. Agreement has been reached on as many as 19 of the 26 proposed chapters in the FTA.
Experts, however, believe that there could be some minor changes to the FTA based on the new government’s priorities but the UK would remain keen on growing its markets in India, especially after Brexit.
Agneshwar Sen, Partner, Tax and Economic Policy Group, EY India, noted that India is a big market for the UK and the conclusion of the India-UK FTA could be a low hanging fruit for the new Labour government to show its willingness to boost trade and investments. “Given that the UK has broken away from the EU, it is important for it to have these FTAs and grow its markets,” he said, adding that it has to be seen how far the policies of the new Labour government change.
The FTA talks will also be shaped by the views of the new government and discussions on the sticking points, such as visas for skilled workers, which would be shaped by its stand on immigration, he said, adding that measures taken by the UK government to boost manufacturing, services, including financial services, and hi tech sectors will be reflected in their expectations from India.
A note prepared by Ajay Srivastava of Global Trade Research Initiative also said that as the Labour Party takes charge in the UK, it may give its approval to India-UK FTA with a minor adjustments and it could be signed as early as October this year. “The Labour Party in the UK is expected to recognise the substantial benefits of the India-UK FTA, as it opens access to a large and growing Indian market, bypassing high tariff barriers,” it said.
However, it underlined that India must focus on two issues—Carbon Border Adjustment Measure, without which the benefits of tariff reductions could be negated by the imposition of high carbon taxes; and remain cautious on non-traditional subjects like labour, environment, gender, and intellectual property rights. “Historically, India has resisted incorporating these topics into FTAs as they often require domestic policy changes,” it said.
Bilateral trade between India and the UK increased to $21.34 billion in FY24 from $20.36 billion in FY24 and the trade deal is expected to enhance it significantly.