In May last year, Prime Ministers Narendra Modi and Boris Johnson announced their shared vision for a transformative decade for the India-United Kingdom partnership. That they met in the middle of India’s second wave of COVID-19, shows their determination to turn their shared political will into action. As part of that transformation, the two leaders declared their ambition to more than double bilateral trade by 2030, which totalled over £23 billion in 2019. They directed their governments to take rapid steps to reduce barriers to trade, and to complete the groundwork necessary to begin work on a Free Trade Agreement (FTA) by the end of 2021.
A beginning
These words have now been made real. Both governments have already taken action; for example, unlocking the export of British apples to India and enabling a greater number of Indian fisheries to export shrimp to the U.K. Small but meaningful steps by which both countries have demonstrated they can and have taken concrete measures to stimulate growth.
The big next step was the launch of FTA negotiations last month. On January 13, 2022 in New Delhi, India’s Commerce Minister Piyush Goyal and the U.K.’s International Trade Secretary Anne-Marie Trevelyan announced their shared ambition to finish negotiations on a comprehensive and balanced FTA by the end of 2022. This is a big task; all trade negotiations are complex, and especially so between two partners of such different sizes and at such different stages of their development. The opportunities an FTA presents, however, are bigger — for both countries.
Businesses in both nations
Before looking at the future, it is worth taking stock of the present. There are nearly 600 U.K. companies in India employing more than 3,20,000 people. This includes: Barclays which has its biggest office outside of London in Pune, whilst JCB’s products manufactured in India are exported to over 110 countries across the globe, as are those by consumer goods giant Hindustan Unilever headquartered in Mumbai; just two of many examples of British companies supporting Prime Minister Modi’s vision for an Atmanirbhar Bharat.
Similarly, India is already a big investor into the U.K. — especially in dynamic sectors such as fintech, electric vehicles and batteries. In 2020-21, India was the U.K.’s second largest source of investment in terms of number of projects. Just last week, both Essar Group and Ola Electric announced investments into the U.K. But given the size of our two economies — the fifth and sixth in the world — our trade relationship in particular has underperformed. An FTA will change that.
The U.K. thrives on free trade. Having left the European Union’s common trade bloc after 47 years (in 2020), we are building a network of like-minded democracies committed to free trade. The Indian government is showing its determination to agree to a new set of trade deals; and it is not coincidental that both governments are negotiating with similar countries, for example, Australia. India has an extraordinary opportunity to transform its economy and society in the next 30 years, as it hits its demographic sweet spot, at the heart of the Indo-Pacific region where half the world’s people live and 50% of global economic growth is produced. Freer trade with the U.K. will help through greater access to a highly open and competitive market, offering valuable opportunities for India’s booming companies — for example giving Bengaluru’s start-ups direct access to London’s capital markets.
Fine prospects
A U.K.-India trade agreement will stimulate growth and employment in both countries. U.K. government analysis shows that, depending on the depth of the deal, an FTA would add around £14.8 billion to the GDP of India and the U.K. collectively by 2035. A trade deal helps diversify supply chains by making it easier and cheaper for more businesses to do business across borders. Lower barriers coupled with greater regulatory certainty would incentivise new small and medium-sized enterprises to export their goods and services. An agreement also means Indian and British consumers see improvements in the variety and affordability of products.
There are good economic reasons for agreeing to an FTA. There are also good strategic reasons. The British Government’s Integrated Review of our overseas policy, which I worked on before coming to India, describes the world we are in; messier, with more geo-strategic competition. It is one in which two dynamic democracies such as India and the U.K. need to work closer together to promote open economies.
From past to future
Finally, an FTA would mark a new way of working between the U.K. and India. It gives a new framework within which the two countries can grow and flourish together, putting the colonial economic relationship where it belongs — in the history books. We should acknowledge that past, especially in this 75th year of India’s Independence, and build a future which is about opportunities for both countries.
This month also marks one year since I presented my credentials to India’s President Ram Nath Kovind. I am honoured to be here at this defining moment — when the U.K. and India will shape the next 25 years of our destiny, as equal, forward looking partners.
Alex Ellis is British High Commissioner to India
