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India and the United Kingdom have launched formal Free Trade Agreement (FTA) with the aim of concluding an early harvest trade agreement within new few months.
India currently has 10 FTAs and six PTAs (preferential trade agreements). It is negotiating 16 new and expanding seven existing agreements, including with trading partners such as Canada, the EU, the US, alongside Australia and the UK.
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A majority” of FTAs under negotiations are “comprehensive” and cover goods, services, investment, IPR, Non-Tariff Measures, regulatory procedures and trade facilitation etc. India is also simultaneously carrying out a review of the existing FTAs with South Korea, Japan and ASEAN on the ground of India’s rising trade deficit with these trading partners.
Read here: India UK Relations and its challenges – Explained, Pointwise
What are the early harvest trade agreements, and what are the implications associated with these deals? Updated on 17th Jan. 22
Explained: Why India is trying to seal a free trade agreement with UK – Indian Express – 17th Jan.
Early harvest agreements initiate bilateral trade by focusing on a restricted list of goods and services. They act as a precursor for a comprehensive FTA. However, there are implications associated with these agreements:
-They can result in delaying a comprehensive FTA. For instance, with Thailand, India has signed a restricted trade agreement in 2004 but has been unable to convert this into an FTA. Similar case with Sri Lanka, where India was not able to conclude an agreement on services and investments.
-Early harvest agreements can be challenged in WTO, as only comprehensive FTA’s are exempt from WTO rules. Article XXIV.8 (b) of GATT exempts only those deals which cover substantially all the trade between two countries.
-Expert notes that early harvest deals reduce the incentive from one side towards a full FTA.
-But in the case of India, early harvest deals also serve the function of keeping trading partners interested, as India had become known for long-drawn negotiations for FTA’s.
What is the present status of the business in both countries? – Updated on 3rd Feb. 22
Ink India-Britain free trade, unlock new opportunity – The Hindu – 3rd Feb. 22
Companies: Nearly 600 U.K. companies in India employed more than 3,20,000 people. Eg: Barclays has its biggest office outside of London in Pune, JCB’s products manufactured in India are exported to over 110 countries across the globe, etc
Investment: India is a big investor in the U.K. especially in sectors like fintech, electric vehicles, and batteries. In 2020-21, India was the U.K.’s second-largest source of investment in terms of several projects. Recently, both Essar Group and Ola Electric announced investments into the U.K.
India and the UK in 2019, declared their ambition to more than double bilateral trade by 2030, which totaled over £23 billion. Some developments have taken place towards these objectives:
– UK enables a greater number of Indian fisheries to export shrimp to the U.K.
– Unlocking the export of British apples to India
– Both countries aim to finish negotiations on a comprehensive and balanced FTA by the end of 2022.
What will be the benefit of FTA with the UK? – Updated on 3rd Feb. 22
Ink India-Britain free trade, unlock new opportunity – The Hindu – 3rd Feb. 22
According to U.K. government analysis, a Free Trade Agreement would add around £14.8 billion to India and the UK GDP collectively by 2035.
Trade deals can help diversify supply chains by making it easier and cheaper for more businesses to do business across borders. Lower barriers would also incentivize new small and medium-sized enterprises to export their goods and services.
Explained: Why India is trying to seal a free trade agreement with UK – Indian Express – 17th Jan
According to India’s commerce minister, this interim agreement aims to achieve up to 65% of coverage for goods and up to 40% coverage for services. Till the agreement has been finalized, it is expected that the coverage for goods goes up to 90 plus percentage.
