India-UK FTA likely to be finalized during Rishi Sunak’s possible visit to India this Diwali

India and the United Kingdom (UK) are on track to finalize a Foreign Trade Agreement (FTA) by the end of October. Both parties are actively addressing key issues, including rules of origin and visas for Indian professionals. The bilateral agreement, which missed the earlier Diwali 2022 deadline, is now expected to be signed during a potential visit by British Prime Minister Rishi Sunak to New Delhi in the final week of this month, as revealed by government officials who preferred to remain anonymous.

One of these officials pointed out that while there has been notable progress on issues related to rules of origin, discussions about the mobility of Indian professionals to the UK are currently in progress.

The point of contention is:

India has been advocating for short-term visas to accommodate skilled professionals who travel to the UK for limited periods to work on specific projects. These workers would not require long-term permits. Conversely, the UK has been hesitant to increase the current quota of nearly one lakh annual work visas issued to Indian nationals.

A 30-member delegation from the UK, in conjunction with an Indian team, is actively engaged in negotiations to resolve outstanding issues, with the goal of concluding talks swiftly. While consensus has already been reached on 24 chapters, efforts are ongoing to wrap up the remaining two, as noted by a second official.

Throughout the FTA discussions, India has faced challenges in areas such as rules of origin for goods, intellectual property rights, and the facilitation of professional mobility.

Commerce Secretary Sunil Barthwal emphasized the complexity and comprehensiveness of the UK FTA, considering it the most intricate agreement India will sign and one of the most comprehensive with a developed country. He also underscored its potential to pave the way for similar agreements during the release of trade data on July 14.

Negotiations for this comprehensive bilateral pact between India and the UK commenced in January 2022, with the original deadline for completion set for October 24, 2022.

Both countries, with upcoming general elections in 2024, are eager to finalize the deal before the end of this year, according to the first official.

The trade potential:

The United Kingdom (UK) holds a significant position as a trade partner for India. In the period from April 2022 to February 2023, India’s merchandise exports to the UK reached $10 billion, constituting 2.5 percent of India’s total exports. Concurrently, India’s merchandise imports from the UK amounted to $8 billion, making up 1.3 percent of all imports, as per data from the Ministry of Commerce and Industry. During this period, the UK ranked as India’s 15th top trade partner.

With the implementation of the agreement, India anticipates an upswing in exports, particularly in sectors like pharmaceuticals, textiles, food and beverages, tobacco, leather and footwear, as well as agricultural products such as rice to the UK. On the other hand, the UK seeks improved access to Indian markets for its exports, which include chemicals, motor vehicles, electrical equipment, medical devices, and spirits.