India and the United Kingdom are set to resume negotiations on their free trade agreement (FTA) on February 24, 2025, following an eight-month hiatus. This development is particularly significant as both countries navigate global trade uncertainties primarily stemming from proposed tariffs by the United States aimed at nations with which it has trade deficits.
The 15th round of negotiations will bring together UK Secretary of State for Business and Trade, Jonathan Reynolds, and Indian Commerce and Industry Minister, Piyush Goyal, as they aim to finalize the trade deal, which has been under discussion since January 2022. This pause—instigated by general elections held last year—has heightened the urgency for both nations to push forward with the FTA negotiations.
Reynolds emphasized the importance of these discussions, stating, "I look forward to meeting Minister Goyal in New Delhi for the relaunch of talks on a trade deal, supporting jobs and prosperity for both countries." This sentiment captures the essence of what the bilateral dialogue hopes to achieve—strengthening economic ties and fostering growth.
Since the last round of negotiations, India has autonomously reduced import duties on specific products, including cars and select bourbons, addressing key demands from the UK side. The UK, being India's 16th largest trading partner, holds significant potential for both economies to boost market access and create job opportunities.
The negotiations are poised to cover key sectors such as advanced manufacturing, clean energy, financial services, and professional services. These areas have been highlighted as priorities within the UK government's upcoming industrial strategy and are expected to benefit greatly from the proposed trade agreement.
Essentially, there is considerable economic opportunity at stake, reflecting the UK and India's positions as the sixth and fifth largest economies globally, respectively. Currently, their combined trade relationship is valued at £41 billion, supporting over 600,000 jobs across both nations.
Yet, challenges loom large. Experts caution against reopening chapters already agreed upon, emphasizing the need for clarity on how new UK policies, such as the proposed Carbon Border Adjustment Mechanism (CBAM), will impact Indian exports. This carbon tax, which is set to be implemented starting January 2027, is seen as potentially burdensome, especially for developing nations like India.
Negotiators from both sides are aware of the importance of addressing workers' mobility, particularly concerning the conditions under which Indian professionals could move to the UK. Reynolds' visit marks the first since the Labour Party assumed power under Prime Minister Keir Starmer. The new government is expected to adopt various approaches compared to their predecessors, indicating they may tackle some settled matters differently.
Overall, the relaunch of FTA negotiations stands to bolster India's growing economy and the UK's aspirations for growth post-Brexit. Jonathan Reynolds observed, "The size of the economic prize is huge as trade between the UK and India continues to grow significantly," reinforcing the mutual ambition both parties have to take their economic relationship to new heights.
Given these discussions are set not just to reinforce economic ties but also to create new pathways for cooperation, the world will be closely watching how this pivotal moment will shape the future of trade between India and the UK.