As the world is drawn into a trade war, India and the UK will sit down and resume negotiations on a free trade agreement on February 24. A team of negotiators from the UK will be in New Delhi to start the 15th round of talks. 

Negotiations on the FTA have been on hold for around a year —  a period which saw a change in government in the UK, the return of President Donald Trump in the US, and the beginning of a tariff war involving the biggest economies of the world.

Having imposed tariffs on Canada, Mexico and China, Trump has said similar action could be taken against  the European Union “pretty soon”. He has, however, left a window open for a deal with the UK. As the largest importer in the world seeks to curb imports, major exporting countries would be looking for markets elsewhere and a renewed push for bilateral and regional trade pacts is expected, according to experts.

India’s recent move to pull back from protectionism by bringing down peak import duties to 70% from 150% would be another factor that will ensure that negotiations restart on a different note and not exactly at a point  where things were left off in March 2024,  experts say.

The FTA negotiations between India and the UK were launched in January 2022 and since then 14 rounds of talks have been held between officials of both sides. Some of the rounds have been long drawn. Despite the intensity of discussions, some of the issues are still to be sorted.

From an Indian point of view, the UK’s demand for greater market access in automobiles, whiskey and some other trade-related issues like rules of origin and intellectual property rights are key areas that are taking time for resolution.

In the services sector, the UK is seeking national treatment for its companies. India’s demand for easier access to the UK market to its professionals through a liberal visa regime is one of the areas where common ground is eluding the negotiators.

Apart from tariff reduction, the Budget announcement of increasing the foreign investment limit on insurance to 100% would be handy in pushing negotiations on the services sector further.Along with the FTA, India and the UK are also negotiating a bilateral investment treaty (BIT).

The Budget announcement of revision of text of the model investment treaty to make it more investment friendly will also give a push to the negotiations on BIT. The UK is the 16th largest trading partner of India and one of the three countries among the top 20 with which it has a surplus.

In April-November 2024, bilateral trade between the two countries stood at $15.0 billion. India’s exports to the UK stood at $9.6 billion and imports were $5.4 billion. Both countries also have a substantial services trade. Services exports to the UK are higher than goods exports. Services exports to the UK in 2023 stood at $17.7 billion while imports were at $12.9 billion. Total FDI from the UK to India stands at $35.2 billion while Indian investment in the UK is at $12.9 billion.