The long-standing India-UK Free Trade Agreement (FTA) negotiations may close this time in April 2025. According to the latest reports, the discussions are in the final stages of the agreement.
90% of the FTA has been agreed upon. The main topics of mutual interest are the tariffs on goods like whisky, cars, and pharmaceuticals, and the Bilateral Investment Treaty (BIT).
The formal trade negotiations started in January 2022, and they have been constantly delayed since then due to various reasons.
What is this India-UK trade negotiation all about?
The main motive of these trade agreement discussions is to mutually support each other's economies through improved revenue for both parties. Here are the main negotiation points:
1. The UK demands lower duties on automobiles, EVs, whisky, and national treatment for its services sector.
2. India demands greater access for its labor-intensive manufacturing sector to the UK market and more flexibility in granting visas for its service professionals.
3. Bilateral Investment Treaty (BIT) to establish a framework for mutual investments and protect investor rights.
4. Mobility/visas for better movement of India's skilled workforce.
5. Carbon border tax exemption from the UK's planned carbon tax on imports of carbon-intensive goods.
Impact of the possible India-UK free trade agreement on the Indian auto industry
The India-UK FTA presents a complex scenario for the Indian auto industry. It could lead to both opportunities and challenges. Here's a look at the key positives and negative nuances that we could think of right now:
Potential positives:
- Tariff reduction or elimination on Indian imported vehicles and components could boost exports for Indian auto manufacturers.
- Greater access for the manufacturing sector laborers and other Indian skilled workers. This means easier visa processing.
- Probability of increased UK investment in the Indian auto sector, especially in auto components manufacturing and EVs.
- Better collaboration between automotive R&D and design between Indian and UK companies.
Potential negatives & challenges:
- Lower import duties on UK-made cars could increase competition for domestic manufacturers.
- Significant reductions in India's high import duties on luxury automobiles (70% to 100%) could lead to a surge of UK-made vehicles into the Indian market.
- India is concerned about the 'Rules of Origin' to ensure that the FTA benefits genuine manufacturers in the UK and doesn't become a backdoor for products from other countries.
- The India-UK FTA could also influence India's negotiations with other trading partners like the EU. This might create pressure to offer similar terms to other countries.
