Alpesh Patel

UK-India Free Trade Agreement

Updated: Nov 15, 2023

Negotiations for the UK-India bilateral Free Trade Agreement (FTA) started in January 2022 with an end-of-year timeline. The two nations failed to agree on terms, and the FTA's progress seemingly stalled for a while. But the ambitious trade pact received a much-needed impetus with Rishi Sunak's recent ascension to power in the UK.

Greg Hands, the trade minister for Britain, stated last month that the UK had completed all major sections of the FTA, which he deemed essential to the UK's economic revival. "A strong FTA can strengthen the economic links between the UK and India, boosting the UK economy by more than 3 billion pounds by 2035 and helping families and communities," Business Standard quoted him as saying.

But is it all cut and dry, as some in business and political circles believe? As it turns out, that's not the case.

Concerns regarding the FTA still abound

Alex Ellis, the British High Commissioner to India, is cautiously optimistic about the two nations reaching a consensus on the trade pact in the upcoming months after 18 months of back and forth.

Businessmen and lobbyists strike a similarly optimistic note. In his conversation with ET Prime last month, Karan Bilimoria, a UK-based Indian businessman and a proponent of the UK-India FTA, was extremely hopeful about the trade pact coming to successful closure.

Opening up the Indian legal sector

While it seems the ball is now in India's court, concerns regarding some provisions continue unabated—particularly after an initial draft of the pact leaked in the press. In one instance, the FTA makes a strong case for liberalization of the Indian legal sector and letting British lawyers practice law in India. However, the Bar Council of India isn't very keen on exposing Indian lawyers to stiff competition.

Controversial IP provisions

Humanitarian organizations have also attacked a leaked chapter of the FTA that concerns IP provisions. Doctors Without Borders has explicitly demanded the complete scrapping of the IP provisions, citing that the leaked chapter contains several harmful sections.

This includes a contentious provision that mandates disclosure of all patents, which might end up crippling the global supply of generic medicines.

If India agrees to play ball and modifies its national IP laws to accommodate UK's demands, it could increase the cost of 25 percent of NHS medicines that India supplies.

Médecins Sans Frontières UK, Oxfam GB, and seven other organizations also implored the UK to withdraw the proposed IP chapter immediately.

Tariff reduction on goods

Andy Street, Mayor of West Midlands, which is the UK's second-largest destination for Indian FDI in the country, considers tariff reduction on goods "the single most important factor" of the UK-India FTA.

But he also expects stiff resistance from Indian carmakers to lower import tariffs. But there is some proverbial silver lining as India has accepted the UK's major demands for a reduction in tariffs on importing Scotch whisky and provisions for higher quotas.

Given that average Indian tariffs are higher than those in the United Kingdom, the latter stands to gain considerably more from the former. Scotch whisky accounts for 90% of all the UK's alcohol exports to India, despite the country's steep tariffs on the beverage (150%).

Can Modi-Sunak deliver?

During their meeting last month, the UK-India FTA was discussed at length between India's External Affairs Minister S Jaishankar and Britain's Foreign Secretary James Cleverly.

It is in the interests of both countries to increase trade and labour mobility between them, so the United Kingdom is pushing for greater access to the Indian market for high-quality British goods.

Speaking at the Global Trade Conference 2022, a week later, Trade Minister Greg Hands remarked, "…our governments are making good progress in negotiating an ambitious FTA which could boost trade between us by as much as £28 billion."

However, several experts are calling for exercising restraint in their expectations regarding what UK PM Rishi Sunak and his Indian counterpart Narendra Modi can actually deliver. Even if the two nations ink the FTA in 2023 as expected, it could be radically different from the leaked draft.