Smartphones, electric vehicles off limits in India-UK free trade agreement

India has not granted market access to the UK in smartphones; small-sized, low-cost electric vehicles (EVs); hybrids; or futuristic cars in the just-concluded free trade agreement (FTA), giving the industry adequate ‘protection’, a senior government official said on Thursday.

 

India exported smartphones worth $1.5 billion to the UK in the 2024 calendar year.

 

Other sensitive industrial products for which India will not reduce import duty under the pact include precious metals and optical fibres. 

The duty on cars will be reduced from 100 per cent to 10 per cent, with a cap on imports over a 10–15-year period. “The market access given to the UK in cars is minuscule. We sell around 5 million cars now. It will be a 10 million market in five to six years. Also, duty-free access to the UK market for internal combustion engine vehicles has the potential to boost India’s automotive and auto component exports,” the official said. 

Government officials said that while the deal was concluded on Tuesday, implementation could take over 15 months. Both sides have started the legal scrubbing of the text, which will take around three months to complete. Thereafter, the agreement will be signed. While India will seek the approval of the Union Cabinet, Britain will need to get the deal passed by its Parliament — a process that may take up to a year. 

“This is a gold-standard FTA that seeks to achieve deep economic integration along with trade liberalisation and tariff concessions,” another government official said. 

The official clarified that India has reduced import tariffs for whisky and gin from 150 per cent to 75 per cent, which will further drop to 40 per cent by the tenth year of the deal. However, no quota or minimum import price will be imposed, the official added.

  “We have followed a pragmatic approach. The duty cut will not hurt Indian industry or consumers, and in fact, it will create jobs in the bottling segment,” the official said.

 

The official also said that the agreement will help increase exports of Indian alcoholic beverages to the UK, as demand is growing.

  Both sides have agreed that if the UK introduces a carbon border adjustment mechanism (CBAM), India reserves the right to retaliate.

  “CBAM will apply to a few products. So, the industry is more concerned about the paperwork related to it. In terms of market access, CBAM will not hurt the industry,” the official said.

  This was one of the pieces of feedback the commerce department received after Commerce and Industry Minister Piyush Goyal met with export promotion councils on Thursday.

  “Despite that, the UK should not put forth such a difficult proposition. However, if India taxes these products, Indian exporters will not have to pay CBAM. The revenue collected from such a tax will help the concerned industry become more sustainable or support our sustainability efforts,” the official clarified.

  The UK will reduce tariffs on industrial goods to zero upon the agreement’s entry into force. This is expected to benefit labour-intensive sectors like textile and apparel. India has offered a duty reduction for medical devices under the production-linked incentive scheme only from the sixth year onwards, with no tariff elimination.

 

Once the deal is implemented, India will gain a competitive advantage in the UK over Brazil in fresh grapes and will match top exporters like Egypt and South Africa. In processed food preparations, India will gain ground over the US, China and Thailand.

 

In bakery items, India will become more competitive than the US, China, Thailand, and Vietnam. In preserved vegetables, fruits and nuts, India will compete with Türkiye, Pakistan, South Africa, and China. In fresh and chilled vegetables, India will have an edge over the US, Brazil, Thailand, and China.