A trade deal with India could be as important to the UK as a deal with the US, according to a new report.
The Resolution Foundation thinktank claims a successful deal would give the UK “first-mover” advantage in India, which is forecast to become the world’s biggest importer by 2050.
The report paints a mixed picture for services industries, however.
While there is potential for UK service exports to grow from a currently low 1.7% share, Britain’s business services firms could also face tough competition at home from lower-cost Indian rivals.
Fast changing economy
There is “significant uncertainty” in assessing the long-term impact of an FTA with India, the report says, as India’s export specialisms are changing so fast.
Eight sectors have recently emerged in the country with a new comparative advantage, compared to just one in the US in the past 10 years.
“Any deal with India, therefore, combines improved access to a fast-growing market with exposure of UK firms to unpredictable future competition,” the report said.
Britain launched negotiations with India this month during a trip to Delhi by Anne-Marie Trevelyan, the international trade secretary.
The government hopes a deal could double UK exports by £28 billion a year by 2035, removing barriers to trading with India’s £2 trillion economy, including cutting tariffs on exports of British-made cars and Scotch whisky.
Achieving a deal won’t be easy as India has a long history of adopting protectionist measures, including the highest tariffs of any major world economy.
Better than CPTPP
The Guardian reports that overtures to India are part of the UK’s pivot towards doing more trade with Asia following its departure from the EU.
The UK is also seeking to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
However, Sophie Hale, principal economist at the Resolution Foundation, said bigger potential economic gains lie in more trade with the still relatively closed Indian economy.
“Trade liberalisation with India is expected to boost UK manufacturing in the short term, but could also benefit business services, where UK firms already enjoy a competitive advantage, and where demand is set to soar,” she said.
By comparison, Yahoo reports that imports by the CPTPP bloc are expected to grow at below the world average in the years ahead.