UK Initiates Public Consultation Process to Prepare for Trade Negotiations with India

May 25, 2021 Posted by India Briefing Written by Melissa Cyrill Reading Time: 4 minutes

The UK government is losing little time in preparing for its trade negotiations with India. It has begun a 14-week public consultation process seeking views from businesses and key stakeholders. Official trade negotiations are expected to begin in autumn.

The UK is seeking a free trade deal (FTA) with India to tap into its US$2.6 trillion economy and a market of 1.4 billion consumers. Under the FTA, it wants the removal of direct and indirect barriers to doing business and trading with India, including the roll-back of tariffs on whisky (up to 150 percent) and British-made automobiles (up to 125 percent).

The UK’s International Trade Secretary Liz Truss said: “We want an agreement that pushes new frontiers in industries of the future and helps us build a greener, more innovative and more services-led economy that will deliver higher-paying jobs across the country.

The UK’s International Trade Minister, Ranil Jayawardena said: “India is one of the world’s fastest-growing economies and we share much in common, so we’re natural partners… A trade deal will break down barriers, making it easier for British businesses to sell their wares in India – and secure more investment, better jobs, higher wages, more choice and lower prices here at home.”

Public consultation process begins

The 14-week public consultation process (you may download the trade consultation document here), announced May 25, seeks to cast the net as wide as possible with inputs wanted from consumers and businesses across a range of sectors.

Their views, concerns, and market access considerations will enable the UK to frame a sustainable deal facilitating closer cooperation in advanced industries, such as science, technology and services, as well as the creation of high-value jobs in the country.

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The bottom line, however, is that the UK wants easier access for its goods and services catering to India’s significant middle-income population and digital consumers, meaning reduction in tariffs and indirect barriers.

Additionally, the UK government wants its services firms to be able to operate in the Indian market, an ask that will not be met easily if India does not enjoy reciprocal advantages.

(We cover specific areas of note for British exporters and industries looking at the Indian market here: How UK Businesses Can Take Advantage of the 2021 Enhanced UK-India Trade Partnership Deal)

UK-India trade deal timeline

Before formal trade negotiations start, both countries have to complete a pre-negotiation scoping phase, which involves a period of engagement with businesses and the public.

The public consultation process ends August 31, and includes a questionnaire that will gather information from participants about their experiences and priorities when doing business with India. Formal trade negotiations are expected to begin later this year, around autumn.

This follows the Enhanced Trade Partnership (ETP), first brought up in February and agreed to three months later at a virtual meet between Prime Minister Boris Johnson and PM Narendra Modi on May 4, where they launched a ‘2030 Roadmap’. The roadmap provides a framework for fostering UK-India trade ties.

Last July, at the 14th UK – India Joint Economic and Trade Committee (JETCO) meeting, stakeholders agreed to prioritize five key areas, namely, life sciences, information communications technology (ICT), food and drink, chemicals, and services to address non-tariff barriers to trade. In terms of expected timeline, the countries were to first work out an enhanced trading arrangement, followed by comprehensive negotiations to a free trade agreement.

State of UK-India trade, investment

India is the UK’s sixth largest non-EU trading partner after the US, China, Japan, Switzerland, and Norway. Bilateral trade in goods and services, in 2019, was around US$15.7 billion and US$18.9 billion, respectively, and are gaining economic importance. Although India enjoys a trade surplus with the UK, the latter’s exports to India have being growing steadily. The fastest expansion was in services. Through the trade deal, India and the UK look to double their trade by 2030. If the deal comes through, it will be India’s first major free trade agreement since 2011 when it inked an FTA with Malaysia. A minor FTA was also reached with Mauritius in February this year.

Britain’s business opportunities in India will improve as the latter continues to liberalize its foreign direct investment (FDI) policy.

Both countries have made significant investment into each other’s economies though there is space for further growth. Data released by the UK government’s Department for International Trade in 2019 stated that India was the second largest investor in the UK, having invested in 120 projects and creating close to 5,429 jobs.

Meanwhile, the UK is the second fastest growing G20 investor in India over the last 10 years.

FDI inflow from the UK to India increased from US$898 million in 2015-16 to US$1.42 billion in 2019-20, according to the consultancy Grant Thornton. Broken down, 572 UK companies in India, with a combined turnover of INR 3.39 trillion (US$46.73 billion), have employed 416,121 people directly.

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Dezan Shira & Associates are a British-owned consulting practice, advising foreign investors on market entry into Asia. Established in 1992, the practice employs several hundred professional staff and has offices in New Delhi, Mumbai, and Bangalore. Please contact the firm at india@dezshira.com for assistance. Our ‘Doing Business in India 2021’ Guide can be downloaded free of charge here.