India has signed 13 Free Trade Agreements (FTAs) and six preferential trade pacts to boost exports and ensure better market access for Indian industries.

Overview of India-UK FTA

• Goals of the India-UK FTA
  • Enhance trade and investment by reducing tariff and non-tariff barriers.
  • Boost cooperation in technology, healthcare, and education.
• Expected Gains in Merchandise Trade
  • India’s Exports to UK (FY24): $12.9 billion
    • Limited impact on exports as half of Indian products already enter the UK with low or no tariffs.
    • No additional benefits for petroleum, medicines, diamonds, machine parts, aircraft, and wooden furniture (already tariff-free).
    • Potential tariff reduction benefits for textiles, footwear, carpets, marine products, grapes, and mangoes.
  • India’s Imports from UK (FY24): $8.4 billion
    • High tariffs on UK products entering India, e.g., 100% on cars, 150% on Scotch whisky and wines.
    • The UK is expected to gain in precious metals, cars, alcohol, cosmetics, machinery, and petroleum products.

Key Demands in India-UK FTA

• India’s Demands
  • Greater access for Indian students and professionals in the UK.
  • Social security agreement for Indian workers in the UK.
  • Zero-duty access for various Indian goods.
• UK’s Demands
  • Lower import duties on Scotch whisky, electric vehicles, lamb meat, chocolates, and confectionery items.
  • Increased access for UK telecom, legal, banking, and financial services in India.
• Proposed India-UK Bilateral Investment Treaty (BIT)
  • Aims to protect and promote investments in both countries.
  • Dispute resolution mechanism:
    • India wants foreign companies to first approach Indian courts before seeking international arbitration.
    • The UK prefers direct international arbitration due to India’s slow judicial system.
  • Investment Impact: No clear evidence that BITs increase investments, but they offer legal security to investors.

What is a Free Trade Agreement (FTA)?

• An FTA is a trade deal between two or more countries that reduces or eliminates import duties on most goods (90-95%).
• It also minimizes non-tariff barriers and simplifies regulations to improve trade in services and investments.
• Types of Trade Agreements
• • Preferential Trade Agreement (PTA) – Tariff reductions on select goods (e.g., India-Thailand PTA).
  • Regional Trade Agreement (RTA) – Trade agreements within a specific region.
  • Bilateral Trade Agreement (BTA) – Trade agreements between two countries.
  • Comprehensive Economic Agreements:
    • CECA (Comprehensive Economic Cooperation Agreement) – India-Singapore
    • CEPA (Comprehensive Economic Partnership Agreement) – India-Korea, Japan
    • TEPA (Trade and Economic Partnership Agreement) – Expansive trade pacts
  • How does FTA work?
    • It is implemented by formal and mutual agreement between the nations to promote trade without restrictions such as tariffs, quotas, or other trade barriers.
    • Nations involved in FTAs do not completely eliminate trade regulations but agree on terms that simplify imports and exports. 
    • It simplifies trade procedure freely while maintaining some level of government oversight. 

Pros and cons of FTAs

• India’s FTA Partners
• • Countries: Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, South Korea, Japan, Australia, UAE, Mauritius.
  • Regional Blocs: ASEAN and EFTA.
  • Current Focus Shift: India is now prioritizing Western economies (UK, EU, US) after securing deals with major Asian partners.

Conclusion

• India’s FTA strategy has shifted from Asia to Western economies.
• The India-UK FTA aims to boost trade by reducing tariffs and easing investment rules.
• Both countries seek mutual economic benefits while protecting domestic industries.