India-U.K. Free Trade Agreement (FTA) Overview
India and the U.K. have agreed on a Free Trade Agreement after 3.5 years of negotiations.
The agreement is expected to be signed in three months and take over a year to fully implement.
There are concerns from domestic industries, especially agriculture and MSMEs, despite overall optimism.
Significance of the Deal
The U.K. is India's 16th largest trading partner, and India is the U.K.'s 11th.
Bilateral trade stands at $60 billion, with expectations to double by 2030.
The new deal could increase trade by an additional $34 billion, coming amid global trade uncertainty due to U.S. tariffs.
Expectations from the FTA
The U.K. will benefit from India reducing tariffs on 90% of product categories, with 85% becoming tariff-free within a decade.
India expects to eliminate tariffs on 99% of exports, boosting sectors like textiles, leather, and engineering.
Tariffs on U.K. imports such as whisky, gin, and automobiles will be reduced significantly.
India secured an exemption for workers temporarily in the U.K. from social security payments for three years.
Industry Response
Indian industries, particularly textiles, automobiles, and gems, are excited about the opportunity for duty-free access to the U.K. market.
The Indian automobile sector expects the deal to help in expanding into the U.K.'s premium market.
The gems and jewellery sector projects a rise of $2.5 billion in exports over the next two years.
Concerns About the FTA
Agriculture and MSMEs: Indian farmers fear the deal may harm their sector, as seen with previous FTAs, leading to price drops.
Local Industry Impact: Concerns that foreign firms will compete more evenly with local businesses, especially in vital sectors like defense and healthcare.
Public Procurement: U.K. companies may get better access to Indian government procurement contracts, potentially increasing import dependency.
Carbon Border Adjustment Mechanism: The U.K.'s plan to impose carbon pricing on imports could hurt Indian exports like aluminium and steel, with the potential for retaliatory measures.
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