The government has announced that the UK and India will begin negotiations for a free trade agreement.

UK trade minister Anne-Marie Trevelyan is in New Delhi today (13 January) meeting with Indian minister of commerce and industry Piyush Goyal to launch the talks.

Double exports

A Department for International Trade statement said the deal could double UK exports by £28 billion a year by 2035.

The government is pushing for an agreement that slashes barriers to trading with India’s £2 trillion economy, including cutting tariffs on exports of British-made cars and Scotch whisky.

Priority

IOE&IT director general Marco Forgione welcomed the government’s announcement today, saying that India is currently a challenging market for British traders.

“India is a huge and dynamic market, but one with relatively high tariff barriers and international traders can face challenges in doing business there,” he said.

“A comprehensive deal that builds on our existing economic, social, cultural and familial ties would be great news for both countries’ economies,” he added.

First round

The first round of negotiations will begin on 17 January and future rounds of negotiations will take place approximately every five weeks, the DIT has said.

Both governments will consider the option of a so-called ‘early harvest’ interim agreement with benefits for both countries.

The UK has previously said that it hopes an interim agreement could lead to reduced tariffs on whisky and cars.

In parallel to trade negotiations, the India-UK Joint Economic and Trade Committee will continue to work in improving the India-UK trading relationship and addressing market access barriers outside of the terms of the future trade agreement.

Challenging barriers

Following a public consultation last year, the DIT has laid out its ambitions and strategic approach for negotiations.

Respondents fed into a broad range of policy areas such as tariffs, where the ambition is to slash duties by up to £6.8bn on UK exports.

The document spells out the UK approach in such areas as rules of origin, customs procedures, SPS measures, and trade remedies.

End of year ambition

According to Reuters, the UK and India hope to finalise a deal by the end of the year.

Scotch whisky and British cars currently face huge duties of 150% and 125% respectively in India.

Cutting these would be a huge win for Britain, but Indian prime minister Narendra Modi is believed to want easier immigration to the UK in return.

Goyal said such issues will not necessarily be a ‘deal-breaker’ in the talks, however.

“Nothing is necessarily a deal-breaker in this agreement,” he said. “And I will not think there is any way for anybody to worry about issues which are sensitive to any country, because both sides have agreed that sensitive issues are not our priority.”

Immigration in play

The FT reports that Trevelyan’s argument “everything is on the table to discuss”, including immigration.

However, it could be politically awkward for the government, with Tory MP Edward Leigh recently telling the PM that the UK shouldn’t be held to ransom over visas for Indian workers.

Scepticism

The Independent reports the Best for Britain campaign group’s claims that a prospective deal should be “taken with a large pinch of salt” given that “historically India starts rather more trade talks than it finishes”.

In 2019, India decided not to join the pan-Asian Regional Comprehensive Economic Partnership (RCEP) trade agreement over concerns about Chinese imports.

Trade talks with the US and EU have also made little progress, though New Delhi is hoping to finalise deals with the UAE and Australia in the coming months.

Growing market

India is set to become the world’s third biggest economy by 2050, with a bigger population than the US and EU combined.

A deal could almost double UK exports to India, boosting total trade by as much as £28 billion a year by 2035. Investment from Indian companies already supports 95,000 jobs across the UK.

Pacific tilt

Prime minister Boris Johnson said the UK’s prioritisation of India reflected its focus on trade opportunities in growing economies in the Indo-Pacific.

“A trade deal with India’s booming economy offers huge benefits for British businesses, workers and consumers. As we take our historic partnership with India to the next level, the UK’s independent trade policy is creating jobs, increasing wages and driving innovation across the country,” he said.