What does the deal involving Air India, Airbus and Rolls-Royce mean for the India-UK trade deal?

Wed 15 Feb 2023
Posted by: Phillip Adnett
Trade News

UK India flags

European giants Rolls-Royce and Airbus, alongside US firm Boeing, have signed a record-breaking deal with Indian national carrier Air India to supply over 470 planes to the airline.

The provisional deal was unveiled yesterday (14 February) by the airline’s parent company Tata Group.

As reported by the BBC, the previous record for planes bought in a single deal was 460 by American Airlines in 2011.

Politicians from Europe and the US, including president Biden, hailed the agreement as proof of deepening western economic and political ties with India.

UK

Both UK prime minister Rishi Sunak and trade and business secretary Kemi Badenoch welcomed the deal, describing it as “momentous.”

According to a government statement, the wings will be designed in Filton and assembled in Broughton, which is expected to bring an additional 450 manufacturing jobs and more than £100m of investment to Wales.

A350 aircraft are powered by Rolls-Royce XWB engines, which are assembled in Derby.

Sunak said:

“The UK is already a top investment destination and by building trade ties with growing economic powers like India we will ensure UK businesses remain at the forefront of global growth and innovation.”

UK-India trade deal

Badenoch said:

“We’re currently negotiating a trade deal with India which could boost trade by up to £28 billion a year by 2035. Export wins like this are another big step to our nations forming a closer trading relationship.”

UK government and industry are expected to rely on India’s desire to create products domestically by agreeing to plans involving co-development and co-creation. Westminster is also expected to rely on its defence and aerospace industry to help build economic relations.

Shifts

Although New Delhi has often remained non-aligned with western nations in foreign policy terms, it is looking to diversify its military spending away from Russia amidst supply chain concerns and western pressure to cut trade.

Russia has supplied India with around $13bn of arms in the past five years, according to Reuters.

“There’s a sense that India sees which way the wind is blowing on this and is leaning into western partners for its defence capability going forwards,” a senior businessperson told Politico’s Morning Trade.

No more deadlines

Badenoch has said she expects to see a trade deal this year, as reported previously by the IOE&IT Daily Update.

The Saffron Walden MP declined to set a specific time frame for this agreement, unlike previous administrations which set hard deadlines for trade pacts.

“I’m expecting those to happen this year. What I’m not doing is setting a deadline because we’ve set artificial deadlines before and actually they’ve hindered rather helped negotiations,” she told Bloomberg.