India, U.K. to re-launch trade talks in new year

Context: India and the U.K. have decided to re-launch
discussions to conclude a ‘free trade’ deal in the new year, following the
election of a new Labour government in the U.K. The announcement of the
imminent resumption of talks, which began in 2022 during the Boris Johnson
Conservative government, was announced by U.K. Prime Minister Keir Starmer,
following a bilateral meeting with Prime Minister Narendra Modi in Rio de Janeiro,
on the fringes of the G20 Summit. The U.K. is seeking to deepen cooperation in
areas that include education, security, technology and climate change.

India-UK relations

·      
About: India and the UK enjoy a modern partnership bound by
strong historical ties and a shared membership in the Commonwealth. The two
countries collaborate extensively across a wide range of areas and are working
to establish a comprehensive strategic partnership by 2030.

·      
Geopolitical
Cooperation: UK supports India’s proposal
for permanent membership of the UNSC. The UK is also an important interlocutor
for India in the EU, G8, G20 and global forums. India-UK political cooperation
deepens through institutions and fora such as India-UK Disarmament and
Non-Proliferation Dialogue, India-UK JWG on Counter Terrorism and India-UK
Foreign Office Consultations.

·      
Economic Cooperation: After the establishment of Joint Economic and Trade
Committee (JETCO) in 2005, the India-UK economic relations has further
deepened.

·      
Defence and
Security: India and the UK signed the
Defence and International Security Partnership (DISP) in November 2015. It
provides a strategic roadmap and direction to the evolving India-UK Defence
Relations. At present, some 70 companies in the UK supply goods for aircraft
and related equipment besides supporting platforms like the Jaguar, Mirage and
Kiran aircraft.

·      
Nuclear
Cooperation: India and UK have signed a
Civil Nuclear Cooperation Declaration in 2010 for the promotion and
facilitation of cooperation in the nuclear field. In 2015, a Nuclear
Collaboration Agreement was signed between the two countries as part of a
comprehensive package of collaboration on energy and climate change.

·      
Education: India and UK have been closely collaborating in the
field of Education. This is evident in the following cases-

Ø  a. The launch of ‘UKEIRI Mobility Programme: Study in
India’ in 2019. Under this Britain’s universities collaborate with Indian
partners and send UK students to India.

Ø  b. UK is among the favoured destinations for Indian
students to pursue higher education, with around 50000 Indian students
currently studying in UK.

·      
Climate and
Environment: India-UK Green Growth Equity
Fund has been established, which helps in the mobilisation of institutional
investments in the renewable energy, waste management, electric mobility and
environment sub-sectors in India.

·      
Cultural
Cooperation: India and UK have signed a
Memorandum of Understanding on Cultural Cooperation in 2010. The Nehru Centre
(TNC), established in 1992 in London, is the cultural outreach of the High
Commission of India in UK.

·      
Diaspora Collaboration: Around 1.5 million people of Indian origin live in
Britain. Indian diasporas are making significant contributions to the British
Society. The representation of people from Indian Origin has increased in the
British Parliament. The outgoing PM of UK was also of the Indian Origin.

Key points

·      
Overview: India-UK FTA is being negotiated under India’s FTA
2.0 approach. The India-UK FTA will serve as a template for India-EU FTA (EU is
India’s second-largest trade partner). India’s earlier FTAs with ASEAN and
Japan yielded moderate results for India. India has taken its learnings from
its earlier approach to FTAs and has come up with a new FTA 2.0 approach.

·      
Challenges
of India’s Earlier FTAs: Uneven
distribution of gains - The margin of preference (actual tariff cuts) given
by India to its FTA partners in the old FTAs were higher than the margin of
preference given by partner countries.

India’s low FTA utilisation - India’s FTA utilisation remained very low at around
25 per cent. On the other hand, developed countries utilise the FTAs to the
maximum (~ 70–80 per cent).

·      
Way
Forward: India’s Comprehensive
Economic Partnership Agreement (CEPA) with the United Arab Emirates and the
Economic Cooperation and Trade Agreement (ECTA) with Australia are both part of
India’s FTA 2.0 approach. India’s exports to both countries have shown a significant
increase just a few months after the conclusion of the CEPA, and remarkable FTA
utilisation statistics have also been reported.

For ex- Development
of Trade infrastructure- Govt must take efforts to give a boost to trade
infrastructure, set up fast track dispute settlement mechanism and digitise
trade procedures.