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The UK government has launched a Free Trade Agreement (FTA) with India on Thursday at an event in New Delhi.
Britain’s international trade secretary Anne-Marie Trevelyan travelled to the country to officially start negotiations with the world's biggest democracy. She is set to meet her counterpart, Indian minister of commerce and industry Piyush Goyal, to formally start talks on a deal.
The agreement will create significant benefits for both countries and could almost double UK exports to India, boosting UK total trade by up to £28bn ($38bn) a year by 2035, and increasing wages by up to £3bn ($4.1bn).
Meanwhile, the proposed FTA is expected to help double bilateral trade in India by 2030, boosting exports in labour intensive sectors like leather, textile, jewellery and processed agriproducts.
The UK is aiming for an agreement that cuts barriers to doing business and trading with India’s £2tn ($2.74tn) economy and market of 1.4 billion consumers, including cutting tariffs on exports of British-made cars and Scotch whisky which currently face enormous duties of 150% and 125% respectively.
India is currently one of the world’s biggest and fastest-growing economies and a bold new deal would put UK businesses at the front of the queue to supply India’s growing middle class, forecast to increase to a quarter of a billion consumers by 2050.
Investment from Indian companies already supports some 95,000 jobs across Britain, and almost 30,000 people in the West Midlands were employed via Indian investment in 2019.
“A trade deal with India’s booming economy offers huge benefits for British businesses, workers and consumers,” prime minister Boris Johnson said.
“As we take our historic partnership with India to the next level, the UK’s independent trade policy is creating jobs, increasing wages and driving innovation across the country. We are seizing the opportunities offered in growing economies of the Indo-Pacific to cement our place on the global stage and deliver jobs and growth at home.”
It comes as India is set to become the world’s third biggest economy by 2050, with a bigger population than the US and EU combined. Goyal has called for enhancement of sectoral cooperation by addressing market access issues and removing trade restrictions.
The minister said that the deal will also contribute in integrating value chains and help augment mutual efforts to strengthen the resilience of supply chains.
Watch: India will be $5tn economy by 2025: Piyush Goyal
The visit highlights the UK’s shift to the Indo-Pacific region, which is home to half of the world’s population and 50% of global economic growth.
It also kicks off plans for the government’s “5-star year of trade”. The UK government is looking to further secure deals with Canada, Mexico and the Gulf, and secure accession to the £8.4tn ($11.5tn) CPTPP trade bloc.
Anne-Marie Trevelyan, international trade secretary, said: “As an independent, deal-making nation the UK is broadening our economic horizons and forging stronger partnerships with the fastest-growing economies of the world. India marks the start of our ambitious 5-star year of UK trade and will show how the deals we negotiate will boost the economies across all nations and help level up all regions of the UK.”
"As both the UK and Indian economies are driven by exciting and innovative services industries, any trade agreement should reflect this and strive to deliver stronger two-way investment and trade in services. It is also an opportunity to break new ground for cross-border services issues and show real ambition to improve global services trade."
Both parties have agreed that the first round of negotiations will begin on 17 January, and future rounds of negotiations will take place approximately every five weeks.
Miles Celic, chief executive of TheCityUK, said: "The industry is committed to supporting the process, including through our work on the India-UK Financial Partnership, which seeks to deliver practical recommendations for deepening linkages between the financial sectors in India and the UK, increasing trade and investment flows, and supporting policy reform.”
Mike Hawes, boss of the Society of Motor Manufacturers and Traders (SMMT), also added: “India is one of the fastest growing global markets with increasing demand for personal mobility and long-term plans to transition to electric vehicles.
“This presents major opportunities for UK automotive companies which, due to their global competitiveness, diversity and expertise, have already proved attractive for Indian investment.
“Key to any future trading relationship will be the progressive removal of tariffs, enhanced trade facilitation and reducing other barriers to trade, which can be highly complex and burdensome.”
Watch: Boris Johnson denies immigration rules will be relaxed to strike India trade deal