International Relation

The U.K.-India relationship is alive with opportunity

24 Aug 2023 6 mins Download PDF

The U.K.-India relationship is alive with opportunity

Why in the News?

UK has launched ‘Alive with Opportunity’, a marketing campaign that showcases the deep bond between India and UK and to build on the continuous exchange of people, ideas and culture.

‘Alive with Opportunity’ campaign:

It is a £1.5 million marketing campaign that aims to stimulate cooperation in areas of trade, exchange of people, ideas and culture between the two countries.
It aims to stimulate interest and demand for U.K. goods and services
It fosters to increase the U.K.’s ability to grow their business through trade with India
To attract new inward investment from India to the UK.

India-UK Trade relationship:

India and U.K. share a thriving trading relationship worth £36 billion in 2022.

India is the second largest source of investment projects in the last financial year in UK with 118 new projects creating 8,384 new jobs across the country.
UK stands as the sixth largest investor (2000-23) with an investment of $34 billion in India in the form of FDIs, 618 U.K. companies in India with a combined turnover of around $50 billion employing more than 4.5 lakh people directly.
UK houses Indian diaspora of over 1.6 million people in workforce and education with Indian students making up one of the U.K.’s largest groups of international students.

The ambitious Free Trade Agreement, a strong partnership:

India currently has an interim (early harvest agreement) pact with UK that aims to achieve 65% of coverage of goods and up to 40% coverage of services.
The early harvest agreement acts as a frontrunner to a more comprehensive FTA.
The U.K aims to double trade with India by 2030 and FTA would accelerate the attainment of this goal.
1. Helps to boost exports for large sectors such as textiles, leather goods and footwear.
2. The enhanced trade shall help in flow of foreign investments to both the countries.
3. It also enhances the prospects for creating new employment opportunities.

Free Trade Agreement (FTA):

They are arrangements between two or more countries who agree amng themselves to reduce or eliminate customs tariff and non-tariff barriers on substantial trade.
FTA covers both trade in goods and services inclusing Intellectual property rights, government procurement and competition policy.

Advantages of FTA:

preferential treatment over non-FTA member country competitors.

For instance, ASEAN has a FTA with India and not with Canada, which has led to imposition f customs duty of 20% for leather shoes to the latter and reduced or zero tariff to India.

Local exporters will be protected from losing to foreign competitors as they will be protected under the FTA.
Reduction of trade barriers leads to creation of a more predictable and transparent trading and investment environment.
Spurs economic growth, lowers spending by the government and boosts technology transfer.

Contentious areas in India-UK FTA:

Intellectual property rights
1. IPR on production of Generic drugs is a red line that India doesn’t want to cross.
2. UK wants stringent IPRs
Digital trade and data protection
1. India wants to frame its own domestic laws regarding data protection without any additional commitments.
2. UK expects free cross-border data flow and rules against data localisation
Rules of origin
1. India wants to have strict rules of origin (ROO) in place to ensure that third countries do not take unfair advantage of the FTA, in contrast to UK’s demand of liberal ROO.
Labour, environment and services