After a year-long pause, UK-India FTA talks are back on track

After a pause of almost a year, UK-India FTA talks are poised to resume. The British Secretary of State for Business and Trade, Jonathan Reynolds, is finalising his visit to New Delhi for the last leg of conversations. This is an important and positive development. Before exploring the benefits of having a Free Trade Agreement (FTA), it is worth noting that UK-India bilateral trade and investment are already growing.

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The total trade in goods and services grew by 10 per cent to reach £42 billion in the four quarters to the end of Q2-2024. This level of trade has almost doubled from before the pandemic in 2019, when the UK-India trade was £24.1 billion.

At the same time, the bilateral investment partnership is strengthening. Based on Grant Thornton Bharat reports, there are 667 British companies in India and 971 Indian companies in the UK.

In another sign of the UK-India partnership flourishing, the two governments announced the UK-India Technology Security Initiative (TSI) last year. It spans collaborations in telecommunications, critical minerals, semiconductors, artificial intelligence, quantum, health tech and biotechnology and advanced materials.

So, while the UK-India trade and investment partnership and collaborations on technology are going from strength to strength, the FTA will be the much-awaited catalyst for growth. It will herald a new and exciting chapter between the two countries.

The negotiations made significant progress in the two years from January 2022, but were paused in early 2024, ahead of the General Elections, first in India and then the UK.

While there was continuity in the government in India, with Prime Minister Narendra Modi winning his third consecutive term, the UK saw a significant change in the government with the Labour Party’s victory.

But though there has been a change in government in London, there has been no change in the UK’s commitment to India or to the FTA.

The TSI mentioned earlier was signed in July 2024 when the UK’s newly elected Foreign Secretary, David Lammy, visited Delhi for meetings with Prime Minister Modi and Minister of External Affairs Jaishankar. During this visit, Lammy restated the UK’s commitment to the FTA. His Cabinet colleague responsible for business and trade, Jonathan Reynolds, announced that same month that the UK government’s top two FTA priorities were India and the Gulf Cooperation Council. More recently in November, when Prime Ministers Modi and Starmer met at the G20 Summit held in Rio, they re-confirmed their commitment to the FTA and announced that the negotiating teams would resume their work in early 2025.

It is no surprise that the two Prime Ministers are engaging in talks for the FTA as it will be economically and strategically important for both countries.

When I speak to UK-based companies, it is evident that India is seen as much more than a market. Rather, it is seen as a source of partnerships, spanning R+D, talent, technology and manufacturing supply chains.

An FTA that enables and encourages more partnerships is vital. The deal has to be future-facing so that trade and investment in tech- and IP-rich sectors can expand and flourish. These, after all, are the industries of the future. So, it is vital that the UK-India FTA creates a framework that supports innovative partnerships and enables the flow of ideas, capital, people, data and IP between our two countries.

It is also important to note that both countries have large consumer bases. So, there is a huge potential for Indian companies to significantly increase their exports to the UK in sectors like food, drinks, textiles and leather goods. The FTA is also important as both countries have strong and complimentary services sectors, including world-leading digital and data services as well as legal, financial and professional services excellence.

The FTA matters beyond direct economic growth. It is also strategically important. Since India and the UK are the world’s 5^th and 6^th largest economies, the FTA will make other major economies sit up and take notice. The FTA would also signal that the UK and India are strategic partners that can negotiate win-win agreements. This will create a platform for collaboration in other areas, including international security, climate change, international development and wider geopolitical challenges facing the world.

As David Lammy said in Delhi in July, the UK-India FTA is a floor for the relationship, not the ceiling.