Background on India-UK Bilateral FTA
Both the countries formally started negotiating on the bilateral free-trade agreement to boost investments and trade in January 2022. In April 2022, the prime ministers of India & UK jointly set the timeline for Diwali to conclude the bilateral FTA talks. The India-UK bilateral FTA is currently in the fourth phase of talks.
Previously, India has concluded a few bilateral trade talks with Australia and UAE in less than 3 months. However, India-UK FTA is much more comprehensive and detailed. It is expected to cover up to 90% of goods and 40% of services. It is also possible that another FTA could be concluded by the end of the year with Israel.
Why bi-lateral trade talks?
India-UK bilateral trade is continuously rising for the past few years. In order to strengthen the supply chain logistics and boost investments, it is important to have a formal agreement between the two nations. India majorly trades with the UK in precious metals, stone machinery, nuclear reactors, and electronic equipment.
Haste makes waste
Maintaining a timeline for any project is good behavior. However, such timelines should reflect any post-planned changes to reflect reality. Experts believe such matters of grave importance cannot be rushed. It is of prime importance to get a fair and equitable deal that benefits both nations. These negotiations are complex and require careful analysis from different perspectives and it’s important to do right by both sides.
Impact on the FTA timeline
Experts, however, believe that the India-UK bilateral FTA is already in the fourth phase of negotiation. Thus, it is very unlikely for there to be a significant shift in the trade agreement. However, it is normal to expect a few months’ delays from the originally targeted Diwali timeline. According to government officials, the political events in the UK are still unfolding, and it is difficult to assess the impact. However, there are has been no indications of any effect of Boris Johnson’s resignation on the ongoing FTA talks.
What is FTA? What are the advantages?
It is a pact between two or more nations to reduce trade barriers. Under this, goods and services can be imported or exported across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange. The government often sees trades as a source of revenue and imposes various duties and taxes.
These imposed duties and taxes are then used to direct the nature of trades in the country. For example, in order to minimize any trade with the unfriendly country, they would impose a very high tax and duties on such imports/exports. These would make the prices un-competitive and thus minimize the trade with such countries.
Using FTA we do the opposite and try to boost the trade by lowering the taxes and duties to make vendor prices for goods and services much more competitive.
