India-UK free trade agreement on track despite Labour Party’s win

New Delhi: With the Labour Party clinching victory in the UK elections, all eyes are now on the India-UK free trade agreement (FTA), which, experts say, will likely be signed by the year-end without any delay.

The Labour Party sees substantial benefits in the India-UK FTA, which provides access to the growing Indian market and bypasses high tariff barriers. This agreement could boost UK exports by offering a significant price advantage, economic think tank Global Trade Research Initiative (GTRI) said in a note on Friday.

"The India-UK FTA nearly finalised, and with a few minor adjustments like curtailing the number of visas for Indian professionals, the Labour Party is likely to approve," it said. "This could set the stage for the agreement to be signed as early as October this year," it added.

Keir Starmer became prime minister after the Labour Party's landslide victory in the UK election, defeating Rishi Sunak's Conservative Party.

Also Read: Mint Explainer: What the Labour Party's victory means for India-UK relations

With bilateral trade growing from $17.5 billion in fiscal year 2022 (FY22) to $20.36 billion in FY223, India and the UK are committed to developing a comprehensive and mutually beneficial trade relationship, experts said.

India and the UK concluded the thirteenth round of FTA talks between 18 September and 15 December. The fourteenth round of negotiations included goods, services, and investment matters.  

Sticky issues include business mobility, scotch whiskey, automobiles, including electric vehicles, farm products, pharmaceuticals, rules of origin, and a separate investment agreement.

"I don't think it will impact the FTA. If you look at their manifesto, this is a new Labour Party, which wants to cement economic engagement with India," said Ajay Sahai, director general at the Federation of Indian Export Organisations (FIEO).

“The FTA will be signed with the UK as early as possible. The only issue we have to be careful of is on scotch, and the Labour Party wanted to bring down the tariff on Scotch.”

Visa issues

Visas for professionals could see some minor tweaks, he said. "Otherwise, there are unlikely to be many changes. As of now, going by their manifesto, I don't expect any problem with the FTA between the nations," he added.

During 2021, after the UK pulled out of the single market and customs union, British companies faced new rules and paperwork for EU trade, slowing their business and prompting a search for new markets. India represents a significant opportunity for the UK.

Also Read: Rishi Sunak’s visa politics has implications for Indian students

"The election of the new Labour government in the UK was not a surprise," said Arpita Mukherjee, professor at the Indian Council for Research on International Economic Relations (ICRIER). “The Labour Party, during the election campaign, have been categorical that they would want to have FTA with India,” she said.

Major issues under the FTA have been addressed, and with both countries having completed their elections, the remaining issues can be resolved. "Businesses on both sides stand to benefit," Mukherjee added.

“The Labour Party mentioned in its manifesto that they will continue the strategic partnership with India and conclude the FTA,” said economist Biswajit Dhar, a retired professor of Jawaharlal Nehru University.

"This is logical because, for the UK to recover quickly, they would need a market like India. Therefore, they will be looking to close the deal as soon as possible," Dhar noted.