Updates on India-UK FTA - how are discussions progressing?

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With a 12th round of trade talks between the UK and India taking place this month, how close is a final deal?

With the UK continuing to pursue bilateral trade deals around the world following Brexit, one of the big prizes for the country's government is the prospect of a free trade agreement (FTA) with India.

Bilateral trade between the two nations reached a new high of US$20.36 billion in 2022-23 - up from US$17.5 billion in 2021-22 and both sides have shown interest in expanded access to the other's market. For the UK, increased goods and services exports to India and a reduction of tariffs are a major goal, while New Delhi is also looking for expanded access for its skilled workforce in the UK in addition to the elimination of customs duties. An agreement would also mark India's first full FTA with a developed nation.

However, progress has been slower than hoped. Former UK prime minister Boris Johnson had originally set a deadline of Diwali 2022 to sign off on the deal, but this was missed amid disagreements on visa allowances and trade standards.

Now, though, there are signs that the end is in sight. After a 12th round of talks this month and a visit by UK trade secretary Kemi Badenoch to India for a meeting of G20 trade ministers, there is optimism that a deal is close.

Talks near final stages

While no firm deadline has been set, there are expectations that a deal can be done this year. Some Indian commentators have even suggested that a final text could be agreed as early as September, when UK prime minister Rishi Sunak is scheduled to visit the country, though the UK government has indicated this may be over-optimistic.

During her time in India, Ms Badenoch has launched a £1.5 million marketing campaign promoting UK-Indian relations, while the coming year will also see a series of targeted trade missions for key sectors.

She stated: "The UK and India have a thriving relationship and we both share an ambition to deepen our cultural and trading ties. India is the UK’s second biggest source of investment projects and I’m confident this new campaign will help boost interest in and demand for UK goods and services even further."

It has been reported that agreements have been reached on the majority of issues, though this does leave some of the most challenging areas to be worked on. The Economic Times, for instance, reported that 19 of the 26 chapters in the proposed FTA have been closed, while product-specific provisions are currently being negotiated to satisfy rules of origin requirements.

What was up for discussion this month?

An Indian government source also told the publication that key areas for discussion in talks this month include an investment treaty, reduction of duties on automobiles and whisky and issues related to services.

Cars and spirits are areas of particular interest to the UK, as these currently attract some of the largest tariffs on key British imports to India. At present, duties on autos are set at 100 percent and Scotch whisky at 150 percent. While it is not expected that any FTA would fully eliminate these tariffs, Bloomberg reports that significant cuts are on the table. 

The news source suggested New Delhi is looking to reduce tariffs to 75 percent for cars and 100 percent for spirits, but the UK would like to see larger reductions, proposing a gradual reduction of whisky tariffs to 50 percent, along with a minimum import price of around US$4 per bottle.

What are the 'sticky' issues that remain?

Despite the progress, there remain several key hurdles ahead. The UK government has acknowledged there remain "sticky" issues to be discussed, including India's desire for a relaxation of UK visa rules, trade standards and dispute resolution mechanisms.

Movement of people has proved a major sticking point, as this is said to be one of India';s highest priorities. with Politico noting that any concessions on this area would likely be highly unpopular within Mr Sunak's Conservative party.

Insiders have also emphasized they are not working to a fixed deadline, following criticism that previous FTA negotiations with Australia and New Zealand gave too much away to the UK's partners in order to secure a swift completion of talks.

A source told Sky News: "It's about the deal and not the date. There are several outstanding issues, and you leave the really tricky stuff until the end."