The Diwali deadline

India-UK FTA needs to be expedited

Another Diwali approaches and the free-trade agreement (FTA) between the UK and India, once promised by an earlier Diwali, has not materialised. There are hopes that UK Prime Minister Rishi Sunak will make a surprise visit to India around Diwali and close the deal, but the number of open issues makes this possibility difficult. Indeed, given the number of open issues, even if an FTA is announced, it will be far shallower and narrower than would be necessary for genuine integration of the two economies.

The political and bureaucratic establishments of both countries are equally responsible for this delay. While the Indian government has reversed its earlier unwillingness to discuss FTAs, it remains far too hesitant about the benefits of trade and concerned about blowback from specific sectors. Even those sectors that do not have a large share of employment and are relatively privileged seem able to delay the closure of FTAs. For example, one outstanding issue with the UK-India FTA, according to much of the recent reporting, is the question of professional services. India is apparently reluctant to open up its market for professional services — in sectors such as legal services — to the UK. This is in spite of it insisting that the movement of workers is an important part of all free-trade deals it negotiates. While professional guilds and firms are of course well connected and politically powerful, it can hardly be claimed that any potential effects on their business will be so large as to outweigh the overall benefits of a new FTA. The Indian government must stop listening to every interest group and keep its eye on the prize: Access to a UK market that has been suddenly deprived of preferential relations with its major trading partner.

The UK government, meanwhile, suffers under obvious political constraints. The Prime Minister who promised a deal by a previous Diwali, Boris Johnson, is long gone, as is his libertarian, free-trading replacement Liz Truss. The current incumbent is, of course, of Indian heritage. Mr Sunak will be sensitive to any accusation that he has given away too much to India. Given his family connections, he has to be particularly careful of any concessions made to India that could be interpreted as favouritism for the Indian corporate sector. Additional work visas that could benefit Indian IT firms will, for example, be inevitably more politically controversial under Mr Sunak than they would have been under Mr Johnson or Ms Truss.

Time is, unfortunately, running out. Unless concluded in the next few weeks, the UK-India FTA may well have to be postponed for months if not years. India has a general election scheduled for early next year, and a new FTA is unlikely to be concluded in the last months of the current administration’s term. But then the UK will be very close to its own election, rendering any bold market-opening moves by Mr Sunak more complex. There is no single person or institution that deserves blame for what looks like a vast missed opportunity. But, nevertheless, Indian companies and workers may wind up regretting a lost chance at access to the one country that is still bullish on new trade partners.