India – UK FTA

K R Sudhaman
There is a general euphoria with Rishi Sunak becoming Prime Minister of United Kingdom. This is natural as India being a vibrant democracy, politics is at its best even on a non-issue. In this, there is some case for celebration with Sunak being a practicing Hindu and for the first time a person of an Indian origin has become Prime Minister of a country which ruled India for nearly two centuries.
Be that as it may, what is more important is will Sunak hasten the much-touted India-UK FTA, which received a set back under the short-lived tenure of his processor Liz Truss. It got dampened when her Home Secretary Suella Braverman remarked that Indians overstayed in Britain in violation of their visa. Stating that the open border migration policy with India is against the objectives of Brexit, Braverman kicked up a storm. Shortly after her controversial statements, Braverman resigned for committing a “technical infringement” which subsequently led to the fall of the 44-day old Truss government. Same Braverman has now been appointed as Home Secretary under Sunak.
Of course, Braverman will surely not indulge in such loose talks now particularly after this episode that derailed important negotiations on the free trade agreement. Sunak, who had taken charge mainly to fix the mistakes made by Truss amidst the severe economic crisis in Britain will be showing more interest now in concluding an early deal after Prime Minister Narendra Modi emphasised on this aspect during his telephonic conversation with Sunak. Modi had telephoned to congratulate Sunak on his assuming office as British Prime Minister. After the US reluctance for an FTA, to bolster the economic fortunes, Sunak’s predecessor Boris Johnson placed his bets on India-UK FTA and pragmatically set Diwali deadline. Sunak was Chancellor of Exchequer, when Johnson was the British Prime Minister. Truss succeeded Johnson for a brief period.
Brexit has weakened the UK- economically and strategically. This has substantially contributed to economic woes of Britain. Covid Pandemic worsened the economy. Britain is no longer part of European Union. While the UK does not suffer from any direct threats from Russia, it has strongly backed Ukraine to be part of Western security systems. In fact, the UK is now the second largest military donor of Ukraine after the US. This support to Ukraine has been pledged by Sunak as well.
With the hopes of the economy getting back on track, the markets have responded positively to his appointment. Sunak’s commitment to pulling the economy out of economy, particularly high inflation has made his party chose him as person best suited for the job in this difficult situation. His fiscal relief packages as Chancellor of the Exchequer during Covid despite their flaws were well received.
The British High Commissioner to India, said with Sunak giving more emphasis to the economy, it was quite natural that both the countries will push early conclusion of FTA. India is a big investor in United Kingdom and vice versa and it is therefore necessary to push the FTA if the two countries were to double bilateral trade by 2030 as envisaged by Boris Johnson. The FTA negotiations, which remained protracted for several years, got hastened in the one year and the two countries were very close to signing it. But unfortunately Johnson government fell in Britain, which was followed by some political instability during Truss.
Sunak as Chancellor during Johnson’s visit to India last April, has gone on record to say that he was committed to pushing FTA between the two countries. He had even identified financial services as one area that offered huge potential for cooperation between the two countries. Early conclusion of FTA will help towards this end. London is a major global financial hub. Fintech and insurance sector offered major opportunity in promoting the bilateral trade. India is now emerging as a major Fintech hub in view of its huge skilled manpower. Mumbai, Giftcity in Gandhinagar, Bengaluru, Chennai, Pune and Hyderabad are emerging as major fintech cities. That apart Mumbai and Chennai have well established underwater cable connectivity with the rest of the world. So the much needed infrastructure for promoting fintech was already in place.
India’s bilateral trade has been growing at 22 per cent in the past decade. It stood at $16 billion. It is expected to more than double with the signing of the bilateral free trade agreement in the next few months. India’s free trade agreement with Canada and UAE too are in advanced stage of completion and they are expected to play a pivotal role in promoting trade alongwith India-UK FTA. (IPA)