New Delhi: With the Labor Party set to come to power in the United Kingdom, India can expect approval of the proposed free trade agreement between the two nations, albeit with minor adjustments, economic think tank GTRI said on Friday.
Keir Starmer will officially become UK Prime Minister later in the day, after his Labor Party won a landslide majority in Thursday's parliamentary election and dealt incumbent Rishi Sunak's Conservative Party a resounding defeat.
The Global Trade Research Initiative (GTRI) said the Labor Party is expected to recognize the substantial benefits of the FTA as it opens access to a large and growing Indian market, avoiding high tariff barriers.
GTRI founder Ajay Srivastava expressed hope that Labor will realize that the FTA with India offers a significant price advantage to UK exporters, which could boost their exports to India by almost immediate.
"As proof, you can look at historical precedents, such as the steady improvement in exports from ASEAN, Japan and South Korea to India following their respective FTAs with India," he said, adding that as the Labor Party takes the command, can approve the FTA with minor adjustments.
He added that the deal is almost finalized and with some minor adjustments, such as reducing the number of visas for Indian professionals, the Labor Party is likely to give its approval.
"This could pave the way for the agreement to be signed in October this year," Srivastava said.
However, the GTRI suggested that India should focus on two issues - the Carbon Border Adjustment Measure (CBAM) and non-traditional issues such as labour, environment, gender and intellectual property rights - in the pact.
India has historically resisted incorporating these issues into FTAs, as they often require changes to its domestic policies.
In addition, the possible imposition of non-tariff barriers, particularly those related to environmental and sustainability standards, is also a cause for concern.
He added that even if the UK agrees to remove tariffs in sectors such as textiles, Indian exports may still need to meet strict UK sustainability requirements and this could negatively impact Indian exports, especially in labour-intensive sectors. .
In this context, he said India must negotiate firmly on these issues to ensure that market access gained by removing tariffs is not undermined by other barriers.
"It is imperative that India proceed cautiously, engaging in broad consultations and strategic negotiations to safeguard its interests. The aim must be to achieve a balanced deal that benefits both countries while protecting Indian exporters from unfair disadvantages," Srivastava said. .
On CBAM, he said that as India finalizes its FTA with the UK, it should seek clarity on how this carbon tax will affect its exports.
Without this, the benefits of tariff reductions could be negated by the imposition of high carbon taxes.
The UK's proposed CBAM raises a major concern for Indian exports.
CBAM would result in the UK gradually imposing higher taxes on imports based on their carbon footprint, potentially far exceeding the UK's current average tariff rates of less than 2 percent.
While the FTA could reduce or eliminate tariffs, Indian exports could still face heavy carbon taxes, unlike UK exports to India, he added.
India and the UK have started talks for an FTA in January 2022 to boost economic ties between the two nations.
There are 26 chapters of the agreement, including goods, services, investments and intellectual property rights.
Bilateral trade between India and the UK increased to $21.34 billion in 2023-24 from $20.36 billion in 2022-23.
Keir Starmer will officially become UK Prime Minister later in the day, after his Labor Party won a landslide majority in Thursday's parliamentary election and dealt incumbent Rishi Sunak's Conservative Party a resounding defeat.
The Global Trade Research Initiative (GTRI) said the Labor Party is expected to recognize the substantial benefits of the FTA as it opens access to a large and growing Indian market, avoiding high tariff barriers.
GTRI founder Ajay Srivastava expressed hope that Labor will realize that the FTA with India offers a significant price advantage to UK exporters, which could boost their exports to India by almost immediate.
"As proof, you can look at historical precedents, such as the steady improvement in exports from ASEAN, Japan and South Korea to India following their respective FTAs with India," he said, adding that as the Labor Party takes the command, can approve the FTA with minor adjustments.
He added that the deal is almost finalized and with some minor adjustments, such as reducing the number of visas for Indian professionals, the Labor Party is likely to give its approval.
"This could pave the way for the agreement to be signed in October this year," Srivastava said.
However, the GTRI suggested that India should focus on two issues - the Carbon Border Adjustment Measure (CBAM) and non-traditional issues such as labour, environment, gender and intellectual property rights - in the pact.
India has historically resisted incorporating these issues into FTAs, as they often require changes to its domestic policies.
In addition, the possible imposition of non-tariff barriers, particularly those related to environmental and sustainability standards, is also a cause for concern.
He added that even if the UK agrees to remove tariffs in sectors such as textiles, Indian exports may still need to meet strict UK sustainability requirements and this could negatively impact Indian exports, especially in labour-intensive sectors. .
In this context, he said India must negotiate firmly on these issues to ensure that market access gained by removing tariffs is not undermined by other barriers.
"It is imperative that India proceed cautiously, engaging in broad consultations and strategic negotiations to safeguard its interests. The aim must be to achieve a balanced deal that benefits both countries while protecting Indian exporters from unfair disadvantages," Srivastava said. .
On CBAM, he said that as India finalizes its FTA with the UK, it should seek clarity on how this carbon tax will affect its exports.
Without this, the benefits of tariff reductions could be negated by the imposition of high carbon taxes.
The UK's proposed CBAM raises a major concern for Indian exports.
CBAM would result in the UK gradually imposing higher taxes on imports based on their carbon footprint, potentially far exceeding the UK's current average tariff rates of less than 2 percent.
While the FTA could reduce or eliminate tariffs, Indian exports could still face heavy carbon taxes, unlike UK exports to India, he added.
India and the UK have started talks for an FTA in January 2022 to boost economic ties between the two nations.
There are 26 chapters of the agreement, including goods, services, investments and intellectual property rights.
Bilateral trade between India and the UK increased to $21.34 billion in 2023-24 from $20.36 billion in 2022-23.
