Post-Brexit, India and UK may finalise trade agreements in areas like pharmaceuticals, fintech, chemicals, defence manufacturing, petroleum and food products by 2021, as the two countries are keen on early harvest deals while continuing negotiations for a comprehensive free trade agreement (FTA), two officials said.
India and UK have a shared commitment towards a free trade agreement, but such negotiations are complex and could take longer. Meanwhile, the early harvest proposition will help the two partners grab the low-hanging fruits within the framework of a comprehensive trade agreement, they said requesting anonymity.
"The two sides are working on the finer details pertaining to about five-six sectors as some announcements are expected during UK Prime Minister Boris Johnson's India visit in January 2021," one of the officials said.
Johnson is the chief guest at India's Republic Day celebration on January 26, which is a significant development in terms of strategic relations between the two countries especially after Brexit, he said.
"Prime Minister Narendra Modi spoke to Prime Minister Johnson on November 27, where the two leaders hoped for a quantum jump in overall India-UK partnership post-Brexit as they saw huge potential for enhancing collaborations in areas of trade, investment, scientific research, energy, defence, security and climate change," a second official said.
The officials mentioned above said that while some key trade deals are expected by 2021, a comprehensive trade deal between India and UK is expected in two-three years.
"India is very cautious while signing any FTA because of its past experience. Various FTAs signed in hurry by the previous governments, particularly with the Asean, are under review as these deals are heavily tilted against Indian interests," the second official said.
Co-chairing the 17th Asean-India Economic Ministers Consultations on August 29, commerce minister Piyush Goyal had said that FTAs had to be "mutually beneficial". He had asked for an early review of the Asean-India Trade in Goods Agreement (AITIGA) as the trade pact was hurting India's interest, as HT reported on August 30.
According to officials, trade negotiations with UK are based on the principle of mutual benefit and arriving at an agreement is relatively easy because of the bilateral nature of negotiations. Negotiations of multilateral trade deals are cumbersome and time-consuming, they said.
Abhishek A Rastogi, partner at law firm Khaitan & Co, said India should be careful of larger and long-term implications of FTAs. "The agreements [with UK] should clearly mention the aspects related to the country of origin of the goods and the percentage of value addition as these issues have been subject matter of debate," he said.
"At the very inception, both the countries should have clear understanding with respect to bilateral investment treaty, which allows for an alternate dispute resolution outside the host state jurisdiction. The relevant clauses should not be legally open ended... [to encourage] investments in both jurisdictions," he said.
Sanjay Aggarwal, president at the PHD Chamber of Commerce and Industry, said this is the "right time" to move forward with an early harvest deal between India and UK. "India is always keen to move from a bilateral trade agreement to FTA... I believe, post Brexit, the complementarities between the two dynamic economies will rise exponentially," he said.
"The areas such as drugs and pharma, fintech, chemicals, defence manufacturing, food and beverages, petroleum products and natural gas are the most growth promising areas of Indian economy and have strategic competitive advantages in the international market for trade and attracting investments," he added.
The trade relations between the two countries have severely stagnated during the last decade, he said. "The bilateral merchandise trade between India and UK increased only from $11 billion during 2009-10 to around $16 billion during 2019-20. We have to scale up the volume to a trajectory with the exploration of untapped potential," he said.
India's main exports to the UK are articles of apparel and clothing accessories, power generating machinery and equipment, petroleum, petroleum products and related materials, miscellaneous manufactured articles, textile yarn, fabrics, made up articles, footwear, medicinal and pharmaceutical products, road vehicles and other transport equipment.
The main imports from the UK to India are power generating machinery and equipment, non-ferrous metals, ferrous ores and metal scrap, general industrial machinery and equipment and machine, transport equipment, beverages, electrical machinery and appliances and electrical parts, professional, scientific and controlling instruments and appliances, chemicals.