Context

• The ties between India and the UK are often described as a Living Bridge, a dynamic economic force of people, businesses and ideas. As Prime Minister Narendra Modi drives forward plans to make India a developed nation within the next 25 years and the UK forges deeper trade relationships around the globe, our connections are growing stronger every day.

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Background: How India-UK trade relationship taking shape in recent time?

• Enhanced trade relationship: India and the UK are two of the largest economies on the planet. Economic relationship between the two is reaching new heights with an enhanced trade partnership.
• Minimised trade barriers: Both have lowered several trade barriers, pledged to bring down many more and set an ambitious target to double the value of India-UK trade by 2030.
• Opening up opportunities in UK: Since then, Indian firms, including established businesses and recent startups, have been finding opportunities in the UK.
• Business and investment in India: British businesses in fields ranging from food to financial services are expanding and investing in India. The car manufacturer, McLaren, which has just opened a showroom in Mumbai, is one example.
• FTA’s beneficial for future and mutual growth: An India-UK free trade agreement is a natural next step for both, bringing two nations with extraordinary plans for their futures closer still.

What are Free trade agreements (FTA)?

• Free trade agreements are agreements between the two or more countries or trading blocks that primarily agrees to eliminate or reduce customer tariff and non-tariff barriers on substantial trade between them.

Importance of Free Trade Agreements

• FTA include multiple trade aspects: FTAs cover a wide array of topics such as tariff reduction impacting the entire manufacturing and the agricultural sector; rules on services trade; digital issues such as data localization; intellectual property rights that may have an impact on the accessibility of drugs; and investment promotion, facilitation, and protection.
• Great impact on economy and society: Consequently, an FTA has a far-reaching impact on the economy and society. Given this, one legitimately expects transparency and greater scrutiny of the FTA process both during and after the negotiations.

How a Free trade agreement with UK will benefit India?

• Greater market access works both ways: Prime Minister Modi has urged Indian businesses to export their products to the world with “zero-effect, zero-defect”. In other words, high-quality goods with no environmental impact. A free trade agreement between our nations could further help achieve this target. It would help Indian firms to sell to a market that imported almost £820 billion of goods and services from around the world in the last 12 months on record.
• UK will aid in the ongoing India’s economic progress: The Indian economy’s future is an exciting one, with the prospect of new technologies, growing businesses and better jobs for its citizens. The UK has the skills and experience to aid this progress. A deal that’s right for both could make it cheaper and easier for ambitious Indian businesses to tap into this expertise. It is also only right that the millions of SMEs that power India’s economy benefit from a deal.
• Investment in one another’s economy will multiply the opportunities: The British cybersecurity solutions firm, Telesoft Technologies, has just said it will pump £10 million into its India subsidiary over the next five years supporting a growing telecoms sector. A free trade agreement that smooths British and Indian firms’ path to invest in one another’s economy would mean such opportunities multiply.
• FTA can be a force of primary economic growth in uncertain times: A free trade agreement’s value cannot be measured entirely in rupees and pounds. Covid-19’s impact on supply chains, slow global economic growth and volatile markets mean we are living in uncertain times, where free trade could be the primary force of prosperity throughout history. It will help to build the long-term security that people around the world need right now.

Conclusion

• In the economic uncertainty, free trade can be considered as answer to building the long-term security that people around the world need right now. In this, the year of its 75th anniversary since Independence and its G20 Presidency, India is on a path to a new economic future. It would be great to have UK alongside on this journey, as we together can use trade to benefit our citizens and the world.

Mains question

Q. Trade between India and UK is on upward trend. Free trade agreement between the two will surely benefit both the countries. How India can take advantage of the FTA between the two?

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