‘Limited benefit for India in trade deal with UK’

The India-UK free trade agreement (FTA) is expected to yield only limited benefits for India, as many of its exports to the UK already enjoy low or zero tariffs, a new research report has said.

This comes even as both countries have fast-paced talks to sign the FTA by the end of the month. UK Prime Minister Rishi Sunak is expected to visit India later this month.

“While textiles, apparel, footwear, agricultural products and certain other items stand to benefit from tariff reductions, substantial growth in Indian exports to the UK will ultimately hinge on product quality improvements rather than the FTA alone,” Global Trade Research Initiative (GTRI) said.

“Signing an FTA alone may not lead to a substantial increase in India’s labour-intensive goods exports. For instance, India’s textiles and apparel exports to Japan did not see significant gains from the FTA. From 2007-09 to 2019-21, India’s exports to Japan grew from $257.7 million to $368.6 million, a cumulative growth of 43.1%, while India’s global exports grew by approximately 67.9% during the same period,” GTRI said in a report.

The modest increase in exports to Japan may be attributed to natural growth factors rather than the FTA, it added.

UK exports face stiff tariffs in India, particularly items like cars, Scotch whisky and wines. The FTA could lead to tariff reductions on these goods, potentially opening new opportunities.

However, India’s reluctance to cut tariffs in certain sectors, like dairy, due to political sensitivities, highlights the need for selective import opening to enhance domestic quality, the report stated.

Indian tariff on British cars is 100% and on Scotch whisky and wines it is as much as 150%. The simple average tariff in India on goods imported from the UK is 14.6%.