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India-UK Free Trade Agreement in Final Stages
- Commerce Minister Piyush Goyal met UK’s Business and Trade Secretary Jonathan Reynolds in London to finalize the long-pending India-UK Free Trade Agreement (FTA).
- Goyal described the meeting as a “productive engagement” aimed at reinforcing bilateral trade ties.
- Talks have reached a conclusive stage, with rules of origin and short-term service visas being the remaining contentious issues.
Key Trade-Offs Between India and UK
- India has scaled down visa demands; UK to offer just ~100 new service sector visas annually, far short of India’s initial proposal targeting healthcare and IT professionals.
- India is pushing for better access to the UK for textiles and services, while the UK seeks tariff reductions on cars, Scotch whisky, and wines:
- India currently imposes:
- 100% duty on cars
- 150% on Scotch and wines
- India currently imposes:
- Indian whisky producers seek relaxation of UK’s three-year maturation rule.
- India’s textile exports face up to 10% tariffs in the UK—an FTA would offer a level playing field against competitors like Bangladesh.
Economic Impact & Sectoral Gains
- According to Global Trade Research Initiative (GTRI), the FTA offers limited trade gains for India, as many Indian exports already benefit from zero or low tariffs in the UK.
- Labour-intensive sectors like textiles are expected to benefit significantly.
- UK exporters will benefit more as India’s average tariff on UK goods is 14.6%, compared to 4.2% UK tariff on Indian goods.
Carbon Tax Concerns
- India is watching developments around the UK’s proposed carbon tax, aligning with the EU’s CBAM (Carbon Border Adjustment Mechanism) expected in 2027.
- The tax could impact Indian exports of steel, cement, and aluminium, raising trade friction.
US-India Trade Deal on Fast Track
- US Treasury Secretary Scott Bessent said a bilateral trade deal with India could be among the first to be signed amid global negotiations to avoid new US tariffs.
- Bessent highlighted “very good proposals” from partners like India, Japan, and South Korea, with Vice President JD Vance recently visiting India for talks.
