Boris Johnson's India Visit: What The UK Will Be Looking For In FTA Negotiations

When Boris Johnson lands in India marking his maiden visit as British Prime Minister, there will be more at stake, especially for the United Kingdom’s, beyond the vanilla 'deepening of the bilateral long-term partnership in the face of global economic challenges'.

Of course PM Johnson will visit Gujarat to meet with leading businesses as well as meet with Prime Minister Narendra Modi in Delhi on 22 April to hold in-depth talks on strategic defence, diplomatic and economic partnership aimed at stepping up security co-operation in the Indo-Pacific. Importantly there will be focus on securing major new investment deals, supporting UK businesses, boosting jobs and growth at home as well as new collaboration on cutting-edge science, health and technology.

“India as a major economic power and the world’s largest democracy is a highly valued strategic partner for the UK in these uncertain times. My visit to India will deliver on the things that really matter to the people of both our nations – from job creation and economic growth, to energy security and defence,” Johnson said ahead of the visit.

India will host the third round of discussions on the FTA with the UK in a hybrid mode from 25 April.

At the second round of talks in March, the two sides shared the draft treaty text covering 26 chapters or policy areas. The two sides have completed discussions on four chapters and reportedly made significant progress in the remaining 22 chapters.

Total two-way trade is currently around $50 billion, including $35 billion of services and $15 billion of goods.

All this is significant in the larger context of the Free Trade Agreement (FTA) with India as, the UK, according to the British High Commission spokesperson, is leveraging post-Brexit trade opportunities with India’s growing economy to drive down prices in key commodities for consumers, open opportunities for UK businesses in areas like green tech and services and create high-wage, high-skill jobs.

“Prime Minister Johnson will use the visit to drive progress in the Free Trade Agreement negotiations launched earlier this year. A deal with India is predicted to boost our total trade by up to £28 billion annually by 2035 and increase wages across the UK by up to £3 billion,” the spokesperson said.

The emphasis of the Johnson visit on trade and investment underlined by the visit to Gujarat is seen as significant in the run up to the FTA, Ambassador Anil Wadhwa, former Secretary (East) in the Ministry of External Affair East, told Swarajya. “The visit is important on aspects separate from the FTA like a push on Defence manufacturing. Defence investment could be a major thing on the agenda especially from the perspective of focus on manufacturing in India rather than importing. From India’s perspective, investments in Defence is most important. We could be looking at some understanding on some kind of technology transfer,” said Wadhwa.

Optimism is riding high against a backdrop of a UK-India Comprehensive Strategic Partnership announced last year by the two leaders on 4 May 2021 wherein trade and Investment were front and centre in a UK-India Enhanced Trade Partnership (ETP) with commitments to double trade by 2030.

Both the leaders agreed to more than GBP 530m in investment into the UK and a deeper bilateral relationship across trade, health, climate, defence and security and connecting the people. In a report on the “Road to a UK-India Free Trade Agreement” by the UK India Business Council, 77 per cent of UK companies surveyed have also stated that Atmanirbhar Bharat is an opportunity for them to do more business with India.

Investment from Indian companies already supports 95,000 jobs across the UK, which is expected to be boosted by upcoming announcements and a future free trade deal. While 9,910 businesses have exported GBP 4.6bn worth of goods to India in 2019, 63,000 UK jobs were estimated to be directly or indirectly supported by exports to India in 2016.

A strategy paper of the UKIBC outlines the importance of securing a deal with India as one of the dynamic, fast-growing economies at the heart of the Indo-Pacific which will give the UK access to a market which promises both short and long-term benefits. “An FTA with India needs to work for the UK,” the report suggests as stakeholders look at an estimated 43 per cent of the UK’s Indian goods imports and 85 per cent of UK’s goods exports to India were Indian demand for sectors of UK specialism and this is expected to grow to over GBP 300bn between 2019 and 2030.

A trade agreement with India will make trade easier and cheaper for UK exporters, whilst improving choice and value for UK consumers. India’s middle class is expected to double from 30 million people in 2019 to 60 million people in 2030, before reaching nearly 250 million in 2050. This demographic change represents a great increase in demand for products and services, creating huge opportunities for British firms selling high quality, iconic brands and products.

Ahead of the third round of negotiations due to be hosted by India this month, there are expectations of a momentum given the conclusion of the second round of FTA talks on 17 March 2022, where negotiators from India and the UK, undertook technical talks and shared a draft treaty text which was discussed across most chapters that will make up the agreement.

Four chapters were discussed and expectations are that this would get a momentum in the third round. According to Wadhwa, in the post Brexit era, there is a growing importance of the Indian market. “Now that they are not part of the EU, UK wants to do separately and quickly as possibly and gain an upper hand as the rest of Europe is concerned. Hence they are pushing for faster realization of some agreements,” pointed out Wadhwa.

Critical in the discussions is UK’s services exports to India which amounts to GBP 3.2 billion, while India has an expanding services sector which accounts for 54 per cent of its economy. The UK and India’s financial markets are already interconnected, with 35 Indian companies listed on the London Stock Exchange and an investment relationship which supports over half a million jobs in each other’s economies.

The UK want the Indian market to open up to financial services further and their financial and legal experts to come and practice here. India may not be close to that idea as our people have much more mobility now and Indian services export is expanding exponentially. A trade agreement could enable further collaboration in these areas by easing cross-border friction and encouraging regulatory alignment, allowing the UK’s financial and professional services businesses to offer expertise, increase trade, and stimulate the Indian market.

The other area of interest for negotiations is the productive relationship between both countries’ research sectors. Indian students are the second largest international student population in the UK whilst there is frequent collaboration between higher education institutions undertaking ground- breaking research.

Provisions which strengthen joint processes and collaboration in these areas will enable higher quality interdisciplinary research in fields such as pharmaceuticals and life sciences.