India-UK FTA sets precedent with dedicated anti-corruption, anti-bribery chapter

The inclusion in the India-UK FTA is a crucial step towards leveling the playing field for exporters and investors who often face inflated costs and operational uncertainty in markets affected by such malpractices.

Although details of the trade pact with the UK are not yet public, India’s decision to cut import tariffs on automobiles from 100% to 10% and on Scotch whisky from 150% to 75% reflects a strong commitment by both sides to boosting trade.

The UK has eliminated tariffs on 99% of its exports to India, covering nearly the entire trade value, as the two nations aim to double bilateral trade to $100 billion by 2030. Negotiations for the free trade agreement began in January 2022.

The anti-corruption, anti-bribery chapter, which commits both countries to uphold their international obligations under United Nations conventions, is aimed at tackling the damaging impact of corruption on global commerce, a commerce ministry official said, requesting anonymity.

India ranked 96th out of 180 countries in Transparency International’s Corruption Perceptions Index 2024, down from 93rd in 2023 and 85th in 2022. The UK ranked 20th.

“Bribery and corruption are significant barriers to international trade, as they increase the cost of doing business and create an unfair trading environment," the UK government said in its document, released on 6 May.

India’s commerce ministry did not immediately reply to queries emailed on Thursday.

Also read | India-UK FTA a shot in the arm for India's green energy manufacturing space

India’s reputation hit

With New Delhi and London agreeing to slash tariffs on a wide range of goods under the India-UK free trade agreement that was concluded on 6 May after three years of tough negotiations, British chocolates, salmon, and Scotch whisky are set to become more affordable in India.

The deal also eases the movement of skilled professionals, resolves the contentious issue of carbon taxes, and opens up a vast market for Indian exporters.

Indian industries expected to benefit most from zero-duty access to the UK include textiles, footwear, carpets, automobiles, and marine products—sectors that currently face tariffs ranging from 4% to 16%.

But India’s reputation as a business destination has taken several hits due to high-profile instances of foreign companies allegedly bribing government officials to get their work done faster or for favourable contracts.

In 2019, two former senior executives of New Jersey-headquartered Cognizant Technology Solutions Corp. were charged with routing illicit payments to Indian government officials through Indian engineering and construction giant Larsen & Toubro Ltd. The Cognizant have officials denied the charges.

That same year, the US Securities and Exchange Commission fined Texas-based technology Oracle Corp. $23 million for paying bribes to an official of a Indian transportation company majority owned by India’s railway ministry.

Last year, US prosecutors alleged that Indian billionaire Gautam Adani and some of his associates had orchestrated a scheme involving the payment of $250 million in bribes to Indian government officials to secure favourable terms for solar power contracts. Adani has denied the charges.

“To fully make use of the FTA with the UK, we have to ensure that we carry out reforms that make India an easier place to do business," said Rahul Ahluwalia, co-founder and director of the Foundation for Economic Development.

“Only EODB (ease-of-doing-business) reforms will help us be competitive with other manufacturing hubs across the world," Ahluwalia said. “Bribery is in any case against the law in India, so the treaty will not add any substantial reform obligations on this front, only better execution."

Also read | Why the India-UK FTA has spooked medical device manufacturers. Hint: China

India-UK FTA’s tough clauses

The provisions in the UK government’s policy paper on the India-UK free trade agreement require both countries to maintain legal and institutional measures to prevent and combat bribery, including criminalisation of bribery in both public and private sectors, and a prohibition on falsifying books and records, the policy paper states.

Importantly, the chapter includes a ban on facilitation payments—small payments made to speed up routine government processes—that are often difficult to track but have a cumulative distorting effect on trade and investment, as per the policy document.

The chapter on anti-corruption further mandates cooperation in combating money laundering and embezzlement, two issues that Indian authorities have increasingly cracked down on in recent years through regulatory tightening and digital surveillance tools.

Another chapter added to the India-UK FTA focuses on competition and consumer protection, aimed at reinforcing a transparent and rules-based regulatory environment.

Under the terms of this chapter, both countries have agreed to uphold their existing regimes on competition and consumer rights, recognising the role of fair market practices in driving innovation, productivity, investment, and economic growth.
As per the document, both sides will promote dialogue and coordination on the enforcement of competition and consumer protection rules.

The chapter commits India and the UK to ensure that their competition laws are enforced in a non-discriminatory manner by independent authorities. It also guarantees key procedural rights for individuals and businesses under investigation, including the right to fair treatment and a proper defence.

This draws significance in the Indian context, with the Competition Commission of India recently issuing a spate of decisions against firms engaged in anti-competitive practices, underlining the need for clear procedural safeguards and robust regulatory cooperation.

Also read | India-UK FTA: Can exporters seize the opportunity amid tough competition?

Bribes and corporate fraud

As per the latest available data released by the National Crime Records Bureau in 2022, India witnessed a 10.5% rise in overall corruption cases. State Anti-Corruption Bureaus registered 4,139 cases in 2022, up from 3,745 in 2021. Of these, 69.7%, or 2,883 cases, were trap cases, typically involving officials caught accepting bribes. Criminal misconduct accounted for 13.2% of the cases, or 547 instances.

According to PwC’s ‘Global Economic Crime Survey 2024–India Outlook’ report, released in December, 59% of Indian organizations surveyed reported experiencing financial or economic fraud in the previous 24 months. The global average was 41%.

The PwC report highlighted procurement fraud as a predominant issue for Indian businesses, with 50% of its survey respondents citing this as a major concern. In its 2022 survey, PwC had found customer fraud to be the leading issue, with 47% of businesses flagging it as their top challenge. On a global scale, 44% of business leaders identified cybercrime as their primary concern, as per the report.