The Free Trade Agreement (FTA) signed between India and the United Kingdom marks a significant turning point in how India engages with Western nations.

• This agreement is not merely a trade deal; it symbolises India’s evolved confidence and assertive stance on the global stage.

About FTA

• A Free Trade Agreement (FTA) is a treaty between two or more countries to reduce or eliminate barriers to trade such as tariffs, import quotas, and export restrictions.
• FTAs aim to facilitate smoother, cheaper, and more predictable cross-border trade and to boost the volume of trade.

Benefits of India UK FTA for India’s Exports

• Zero Tariffs: 99% of Indian products entering the UK will face 0% tariffs.
• Increased Exports: Indian exporters will be able to send more products like clothes, jewellery, electric vehicles, marine products, and generic medicines to the UK because its market is now open to Indian goods with zero tariffs.
• Competitive Edge: This gives India an advantage over countries like China and Vietnam, whose goods will be more expensive in the UK due to applicable tariffs.
• Projected Growth: India’s exports to the UK are expected to increase by 30-40%.
• Economic Impact in India: This export growth implies the establishment of more factories, increased work, and the generation of more jobs.
• Beneficiary States: States like Gujarat, Tamil Nadu, and Maharashtra are projected to benefit the most due to their higher export volumes.

Benefits for UK Exports to India

• The UK products such as Scotch Whisky, luxury vehicles (e.g., Jaguar Land Rover), cosmetic products, and dairy products will face reduced tariffs in India.
  • Example: the tariff on UK whisky, currently at 150%, will be halved to 75% immediately and further reduced to 40% over the next 10 years.

Benefits for Services and Professionals

• Government Tenders: UK companies will now be able to bid for tenders issued by the Indian government.
• Easier Visas: Indian professionals, including yoga teachers, chefs, and tech workers, will find it easier to obtain short-term visas (up to 2 years) for the UK.
• Social Security: Indian workers will not be required to contribute to the UK’s social security system if they are already contributing to a similar system in India.
• MSME Empowerment: Indian Micro, Small, and Medium Enterprises (MSMEs) are identified as major beneficiaries, as their products can now be sold in the UK market without tariffs.

India’s Assertive Stance In FTA Negotiations

• Non-Negotiable on Agriculture: India explicitly refused to negotiate on its agriculture sector. 
  • India declared agriculture to be a highly sensitive sector, vital for farmers’ income and national food security, stating that it would not compromise on this.
• UK’s Acceptance and India’s Assertiveness: The UK government understood and did not press India further on opening its agriculture sector, demonstrating respect for India’s firm stance. This clearly shows India’s assertiveness.
  • This approach highlights India’s pragmatism: being open to industrial trade and negotiations but remaining unwavering on sectors crucial for the country’s long-term progress.

The India-UK FTA as a Template for Future Engagements

• Blueprint for Other FTAs: This FTA will serve as a template for India’s future trade negotiations with others such as the European Union, ASEAN, Japan, USA.
• Leveraging the UK Deal: India can now confidently inform countries like the USA that since it did not open its agriculture sector even with the UK, it will not do so with them either.
  • USA Negotiations: FTA negotiations with the USA are currently at an important stage. 
  • The USA had imposed a 25% tariff on Indian imports, a decision that has been postponed until August 1st due to ongoing FTA talks. 
  • If the USA pushes India excessively on sensitive issues like food data, it might hinder the negotiation process.

India’s Growing Confidence in Global Trade

• UK’s Weak Position: After Brexit, the UK urgently needed strong trade partners and was keen to sign an FTA with India.
• Equal Terms: India is now a self-reliant economy and negotiates with Western countries on equal footing. It has the confidence to reject terms that do not serve its interests.
  • The Western countries are adjusting to India’s demands due to its large market and economic strength.
• Active Outreach: FTAs are now essential for India’s economic growth and global relevance. India is proactively signing FTAs with countries like Australia and the UAE, showing a mature trade approach.

Conclusion

This agreement underscores India’s strategic shift from a hesitant trading nation to a confident and assertive global player.

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