A favourable moment

India should close trade deal with UK by targeted date

British Prime Minister Boris Johnson has completed a two-day visit to India, during which he visited Gujarat and New Delhi. Mr Johnson’s trip was his first official visit to India as prime minister, and comes amid a push to conclude discussions on a free trade agreement (FTA) in less than a year. 

Talks on an FTA were formally launched in January 2022, and the joint statement issued at the end of Mr Johnson’s visit indicated that the leaders “set a target to conclude the majority of talks … by the end of October 2022”. While trade and investment was naturally a major pillar of the talks, it cannot be ignored that this visit came amid a shadow cast by Russia’s invasion of Ukraine, which has returned global security and the protection of sovereignty to the top of the geopolitical agenda.

Mr Johnson has been at the forefront of providing weaponry and moral assistance to the embattled government in Kyiv. While India has repeatedly called for negotiations and a peaceful resolution of the war, it has also chosen to abstain from several high-profile votes on the conflict at the United Nations. This has caused some critical comments in the West. Yet the joint statement suggests that decision-makers in the West are willing to look beyond India’s stand on this particular conflict and continue — and indeed deepen — engagement with New Delhi. Given India’s constraints, this is certainly a major achievement for its foreign policy establishment. A reminder that India is not part of any bloc may have served to increase enthusiasm to integrate India’s economy and security interests with those of the West.

It is essential that Indian policymakers seek to capitalise on this favourable momentum and move closer towards trade agreements with its partners in the West. Certainly, the short deadline suggested for concluding “the majority of talks” on a possible FTA with the United Kingdom will strain Indian negotiators. But every effort must be made to achieve an agreement by the targeted date. The pain points for the UK negotiators are clear. They include lower tariffs on Scotch whisky and British automobiles, as well as access to the Indian market for medical devices. Services — financial, accounting, and legal — are also sectors that the services-dominated British economy could benefit from access to in India.

It may be necessary for India to make concessions in a reasonable subset of these sectors, given the size of the payoff in other sectors such as information technology, textiles, rice, and footwear. The latter are big employers, and given India’s jobs challenge, increasing the scope of favourable access to developed-world markets for enterprises in these sectors must be a priority. Indian policymakers have made a clear effort in recent months to strike interim or early harvest deals on trade with countries like Australia. But the agreement with the United Kingdom should ideally be deeper and more comprehensive than those that have gone before. After that, investment and trade deals with the United States and the European Union should be high on the agenda. The foreign policy establishment has opened up considerable room to manoeuvre for India’s trade negotiators. 

This moment should not be wasted.