Speaking at the Rashtrapati Bhavan, India’s presidential residence, in April 2002, the then UK Prime Minister Boris Johnson voiced a typically assertive prediction about the negotiations for a free trade agreement (FTA) between the UK and India. “We are instructing our negotiators: get it done by Diwali in October,” he declared following a grand ceremonial welcome on the grounds of the colonial-era edifice designed by Sir Edwin Lutyens. However, as it often happened with Mr. Johnson’s pledges, his actions fell short of matching the grandeur of his statements. Two years later, the much-anticipated FTA remains unsigned.
Current Efforts to Seal the Deal
The Labour government has since expressed a strong resolve to finalize the FTA, an intent emphasized through several high-profile visits to India by top officials such as Deputy PM Angela Rayner, Secretary of State for Business and Trade Jonathan Reynolds, and Foreign Minister David Lammy. Lammy highlighted, “Our Free Trade Agreement negotiations represent the foundation, not the limit, of our aspirations to unlock our mutual potential and foster growth, from Bengaluru to Birmingham.”
Negotiations are set to restart later this month after an eight-month break due to elections in both countries. India is advocating for increased access to the UK market for its skilled professionals in sectors like technology and healthcare. Conversely, the UK is seeking expanded opportunities in India for its service industries, including telecommunications, legal services, and banking. Balancing these demands and subsequently marketing the agreement to their citizens will necessitate careful handling in both London and New Delhi.
The UK is also pressing for India to reduce import duties on various products, including meat, chocolate, electric vehicles, and Scotch whisky. Indian Prime Minister Narendra Modi, however, recognizes that these tariffs are crucial for safeguarding local jobs.
Consider Scotch whisky, which, despite its popularity in India, currently represents only 2% of the market due to a hefty 150% tariff on imported liquors. Reducing this duty could potentially increase sales to £1 billion over the next five years, as per The Scotch Whisky Association, but it could also jeopardize the burgeoning sales of domestic Indian whisky brands.
Economic and Strategic Importance
Nevertheless, the foreign secretary’s aims are justified. According to the UN’s COMTRADE database, the export values of India and the UK were nearly identical in 2023. With a population over 20 times that of Britain and an economy expected to become the third largest globally by 2030, India presents a critical market for the UK.
During his visit to India, Mr. Johnson toured the UK-owned JCB factory in Gujarat and met with India’s richest man, Gautam Adani, whose conglomerate spans clean energy, supply chains, and infrastructure. Both JCB and Adani Group exemplify how a robust, substantive FTA could spur economic growth in the UK, especially in sectors like technology, commerce, energy transition, and research and development.
Additionally, a trade deal could greatly benefit the UK’s services, intellectual property sectors, and higher education—a vital export facing financial challenges. Examples include the Mumbai-based SP Jain School of Management, which recently opened a new educational center in Canary Wharf, and the University of Southampton, the first UK university to receive a license to establish a campus in India.
Personal and Political Perspectives
My support for an FTA is deeply personal. Born and raised in a modest family in India, I moved to the UK in 2001 with little to my name. In London, I launched and grew fintech firms that leveraged advanced technologies to make international payments more accessible and affordable. Following my entrepreneurial journey, I served as Deputy Mayor of London for Business for two terms, advocating for businesses and fostering entrepreneurship, including among the Indian diaspora.
Despite the obstacles, the outlook is promising. India’s recent FTAs with Australia and the UAE, which took effect in 2022, have led to a predicted 38% increase in imports from FTA countries this year compared to 2019, according to research by the think tank GTRI. If similar trends follow, UK exports to India could rise from £16.6 billion to almost £23 billion. An FTA could also boost India’s GDP by as much as £8.6 billion.
After 14 rounds of talks since January 2022, significant headway has been made, with agreements in principle or broad consensus reached on 24 of the 26 chapters in the FTA. As negotiations resume, the UK government should push for a swift finalization of the deal and establish a reliable timeline for its implementation.
As Chair of Labour Friends of India, I was thrilled to participate in a recent Diwali celebration at Downing Street, hosted by Keir Starmer. The event featured a traditional Indian Kuchipudi dance and the famous No 10 staircase adorned with garlands of orange marigolds, creating a breathtaking and poignant scene.
After lighting a diya oil lamp, Prime Minister Keir Starmer spoke of the UK’s “valued relationship” with India and the aspiration to build “a long and shared future together.” While the UK alone cannot dictate the terms, my hope is that by next Diwali, a new and impactful FTA will be in place, giving us even more reason to celebrate.
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Jamie Prescott specialises in economic journalism, breaking down complex topics like global trade and finance into digestible stories. Jamie helps readers stay informed about the economy and its impact on local communities.
