India-UK trade talks to focus on key tariff barriers and emerging sectors

The India-UK free trade agreement (FTA) talks that are set to resume in early 2025 will focus on a range of critical areas including market access, regulatory frameworks, and tariff barriers.

The Indian industry is advocating for greater access for skilled professionals, particularly from sectors like IT and healthcare, in the UK market, alongside market access for various goods with zero customs duty. 

Meanwhile, the UK is pushing for substantial reductions in import duties on goods like scotch whiskey, electric vehicles, lamb meat, chocolates, and certain confectionery items. 

Additionally, Britain seeks expanded opportunities for UK services in India, particularly in telecommunications, legal, and financial services such as banking and insurance.

The negotiations, which were paused in May 2024, are now set to resume following a formal announcement by the UK prime minister. The resumption of FTA talks comes at a crucial time, as both nations look to deepen their economic ties in line with India’s ambitious export targets.

The UK remains a priority market for India’s efforts to reach $1 trillion in exports by FY30. Exports to the UK are expected to reach $30 billion by 2029-30, the Indian government said in a statement on Wednesday, highlighting the long-term potential for increased collaboration.

A successful FTA would facilitate increased trade across sectors like technology, agriculture, and manufacturing, while also deepening diplomatic ties, said Abhash Kumar, assistant professor of economics at Delhi University.

"With complementary strengths, India and the UK are well-positioned to craft a mutually beneficial agreement. India and the UK should prioritise deep tariff concessions to encourage trade expansion across sectors,” said Ajay Srivastava, former Indian Trade Services officer and founder of Global Trade Research Initiative (GTRI).

“One pressing concern is the UK’s carbon border adjustment mechanism (CBAM). India must seek clarity on whether this tax would apply to Indian exports post-FTA. If the UK retains CBAM for Indian goods, it could create an asymmetry in trade flows. While UK goods may enter India tariff-free under the agreement, Indian exporters could face additional costs, effectively negating the benefits of the FTA. This disparity must be addressed upfront to ensure a level playing field,” Srivastava told Mint.

Trade ties reset

India and the UK agreed to resume FTA negotiations early next year, following a pivotal meeting between prime ministers Narendra Modi and Keir Starmer at the G-20 Summit in Rio de Janeiro, Brazil. 

India’s commerce ministry welcomed the move, acknowledging the importance of finalising a balanced and mutually beneficial FTA with the UK.

The government is optimistic that the talks will address any remaining issues and bring both sides closer to a comprehensive agreement.

“India looks forward to closely working with the UK's negotiating team to address remaining issues to mutual satisfaction,” the Indian government said in a statement.

Also read: Department of Commerce welcomes resumption of FTA talks between India, UK

Dates for the resumed negotiations will be confirmed soon through diplomatic channels, with the aim of finalising the talks in early 2025.

India’s commerce ministry indicated that the discussions will build on the progress made before the pause, aiming to bridge gaps and expedite the deal.

India-UK economic ties

India’s trade relationship with the United Kingdom continues to strengthen, reflecting the growing economic ties between the two nations.

The commerce ministry’s trade data from April to September 2024, reveals a 12.38% growth in India’s exports to the UK, amounting to $7.32 billion compared to $6.51 billion during the same period in 2023.

Mineral fuels, machinery, precious stones, pharmaceuticals, apparel, iron and steel, and chemicals form the bulk of India's exports to the UK, contributing 68.72% of the total export value, it showed.

With bilateral trade growing from $17.5 billion in fiscal year 2022 (FY22) to $20.36 billion in FY23, India and the UK are committed to developing a comprehensive and mutually beneficial trade relationship, a report by the Global Trade Research Initiative (GTRI) said.

Also read: UK businesses drive growth in India’s economy, contributing over ₹5 trillion in revenue

India and the UK completed the thirteenth round of FTA talks from 18 September to 15 December 2023. The fourteenth and final round of negotiations began in January 2024, covering discussions on goods, services, and investment matters.