India and the UK will likely discuss the possibility of a free trade agreement when commerce and industry minister Nirmala Sitharaman meets Liam Fox, the UK’s secretary of state for international trade, in New Delhi on Monday, sources said on Friday.
Fox is visiting India as part of a 250-member delegation led by British Prime Minister Theresa May. Sitharaman is expected to be a part of the meeting between Prime Minister Narendra Modi and May on Monday. Although May’s visit is aimed at boosting bilateral co-operation in various areas following Britain’s decision to pull out of the EU, the discussion on trade will be a crucial part of it, the sources told FE.
Both the sides started informal talks on the possibility of either a free trade or a preferential trade arrangement in July, just days after Brexit, when the UK’s then business minister Sajid Javid had met Sitharaman and expressed willingness to further improve trade relations. The UK accounts for over a half of India’s software services exports to the EU, 23% of its textile and garment exports, 23% of key engineering and electrical goods exports and 16% of jewellery, precious metal and stones exports.
So, senior industry executives from these sectors have endorsed an FTA or PTA with the UK. Britain alone accounted for 3.4% of India’s goods exports in 2015-16, while the EU — including the UK — made up for 17%.
FE had earlier reported that India was open to a trade pact with the UK and the country was also considering re-calibrating its strategy, including re-negotiating tweaking its tariff offers, for the proposed FTA with the EU in view of Brexit.
However, with both the EU and the UK busy grappling with various issues following Brexit, serious trade negotiations with India will likely take some time.
Also, according to rules, EU member nations can’t negotiate trade deals on their own as long as they are part of the Union, as the power to hold such talks lies with the EU. Moreover, a British court ruled on Thursday that the government requires parliamentary approval to start the process of leaving the EU, which has potential to delay May’s Brexit plans. For its part, the UK government has said it would appeal against the high court ruling and the British Supreme Court will likely consider the case as early as next month. However, informal talks can take place between India and the UK so that once Britain’s pull-out process is formally over a trade arrangement can be put in place easily, without wasting much time.
The bilateral goods trade between India and the UK touched $14 billion last year, down 2.2% from a year earlier. The UK was also the third-largest investor in India between April 2000 and March 2016, with FDI of $23.1 billion. Indian companies, especially the Tata Group, have invested massively in the UK as well.