India-UK Trade Deal Delayed As Key Issues Remain Unresolved, Says Report

The ongoing dialogue spans 3 separate but interconnected pacts—the FTA, a bilateral investment treaty, and a social security agreement officially known as the Double Contribution Convention Agreement.

The key areas requiring further deliberation include the sunset clause in the investment treaty, the UK's recently introduced carbon tax, and matters related to data localisation.

Source : Freepik

India and the United Kingdom are still navigating unresolved concerns in their efforts to conclude three crucial agreements, including a much-anticipated free trade agreement (FTA).

Citing sources familiar with the matter, PTI reported that the negotiations require more time, as a few sticking points remain unsettled between the two nations.

The ongoing dialogue spans three separate but interconnected pacts—the FTA, a bilateral investment treaty (BIT), and a social security agreement officially referred to as the Double Contribution Convention Agreement.

The report noted that around four to five outstanding matters across these pacts are yet to be resolved, stalling any final announcement.

Stumbling Blocks Include Taxation, Investment Protections

Although talks were expected to culminate in a formal declaration on April 29 in London, last-minute hurdles prevented both sides from sealing the deal.

“Certain critical issues are still there. Some more meetings would happen,” the report added citing one source, highlighting the complexity of the discussions.

The key areas requiring further deliberation include the sunset clause in the investment treaty, the UK's recently introduced carbon tax, and matters related to data localisation.

Commerce and Industry Minister Piyush Goyal recently met with his British counterpart, UK Secretary of State for Business and Trade Jonathan Reynolds, during a visit to London to review the progress of the talks. Goyal concluded his two-day London engagement on April 29, after which he travelled to Oslo and Brussels before returning to the UK capital on May 2.

Finance Minister Nirmala Sitharaman  earlier held the 13th Ministerial India-UK Economic and Financial Dialogue (EFD) with British Chancellor Rachel Reeves on April 9. The meeting ended on a positive note, with both ministers sharing optimism about finalising the agreement soon.

Negotiations on the proposed FTA resumed on February 24 this year, led by Goyal and Reynolds after a hiatus of more than eight months. Since talks began on January 13, 2022, both countries have completed 14 rounds of negotiations. FTAs typically aim to reduce or eliminate tariffs on the majority of goods traded between the two signatories, while also promoting trade in services and facilitating investment.

Diverging Demands on Market Access

India’s business community has called for broader entry into the UK market for professionals in sectors such as information technology and healthcare. In addition, New Delhi is pushing for zero-duty access for a range of Indian goods.

Meanwhile, the UK is pressing for significant tariff cuts on exports such as Scotch whisky, electric vehicles, lamb meat, chocolates, and confectionery. Britain is also eyeing enhanced entry for its service providers in India's telecommunications, legal, financial services, and insurance sectors.

The draft FTA currently includes 26 chapters covering a broad spectrum of trade areas, including goods, services, investments, and intellectual property rights. Bilateral trade between the two countries grew to $21.34 billion in 2023-24 from $20.36 billion in the previous year. Goods imported from India into the UK currently face an average tariff of 4.2 per cent.

As per insights from the Global Trade Research Initiative (GTRI), Indian exports such as apparel, textiles, footwear, carpets, automobiles, seafood, grapes, and mangoes are expected to benefit significantly from the agreement, due to relatively low to moderate tariffs imposed on these products in the UK.