Early Harvest trade deal signals a shift in India’s reluctance to pursue FTAs
India and the UK aim to launch free trade agreement (FTA) negotiations on November 1, 2021, with the two sides agreeing to an early harvest deal by March 2022, allowing the two to establish selective gains in raw materials and services. The decision was taken after a meeting between Indian Minister of Trade and Industry Piyush Goyal and his British counterpart Elizabeth Truss on September 13. The announcement comes at the start of India’s biggest ambitions to speed up its FTA negotiations with several other countries, namely the European Union, Australia, the United Arab Emirates and Canada. India is optimistic about reaching an Early Harvest trade deal to liberalize tariffs on certain products with these countries, followed by a full FTA. An Early Harvest program serves as a precursor to an FTA between two countries to help them identify certain products and services for tariff liberalization in order to further build trust between the two trading partners.
India is optimistic about reaching an Early Harvest trade deal to liberalize tariffs on certain products with these countries, followed by a full FTA.
The Indian government has reorganized its FTA strategy, to move beyond protectionism and engage with the rest of the world to avoid being excluded from global markets. The proposed FTA between India and the UK is expected to open up business opportunities and generate jobs on both sides. Earlier this year in May, the two prime ministers, Narendra Modi and Boris Johnson, announced the Enhanced Trade Partnership (ETP) to realize the full potential of India-UK trade and trade relations. The ETP is an integral part of the 2030 Roadmap for India-UK relations to revitalize investment and collaboration between the two parties by removing trade barriers in key sectors such as agriculture, health, education and social security, with the ultimate objective of the road map. 2030 being the establishment of the Comprehensive Strategic Partnership (CSP) between India and the United Kingdom. The UK has such agreements with just four other countries: Australia, Canada, Japan and South Korea. As part of the design of the 2030 Roadmap, a Joint Trade Working Group was formed to understand each other’s ambitions and interests in reducing and removing barriers to market access. on both sides. Negotiations with the UK and the West are an integral part of India’s trade strategy to institute fair and balanced trade agreements with key economies to boost trade, especially in the context of the withdrawal from the United States. India of the Regional Comprehensive Economic Partnership (RCEP) in 2019.
As mentioned above, India aims to sign multiple FTAs ââby the end of next year, which would be monumental as India has not signed any FTAs ââunder the Modi government after decades of mixed returns on various free trade agreements. India’s main concern with FTAs ââhas been a high trade deficit with its trading partners, as Indian exports barely penetrate Southeast Asian markets; however, to avoid such an event, India would have to focus on increasing its export capacity with the UK. The Commerce Ministry expressed concern about the stagnation in the value of exports over the past decade, indicating the desire to export high-value products rather than low-value products and raw materials. India’s reluctance to an FTA was based on its assessment of existing agreements where overall export growth remains weak as India’s trade deficit with ASEAN, South Korea and Japan has widened after FTAs ââwith imports greater than exports. The India-UK FTA offers both parties the opportunity to expand their current relationship by converging in key progressive areas such as sustainable and green technologies, intellectual property, data regulation and privacy in the context of the next Indian presidency of the G20 in 2030.
Negotiations with the UK and the West are an integral part of India’s trade strategy to institute fair and balanced trade agreements with key economies to boost trade, especially in the context of the withdrawal from the United States. India of the Regional Comprehensive Economic Partnership (RCEP) in 2019.
Table 1: India – UK trade statistics 2017 – 2021
|India-UK trade statistics (2017-2021)|
|Exports (US $)||Imports (US $)||Exports (US $)||Imports (US $)||Exports (US $)||Imports (US $)||Exports (US $)||Imports (US $)|
US $ billion
Source: Ministry of Trade and Industry, Government of India (2021)
Table 2: Economic indicators for India and UK (2020)
|India||The United Kingdom|
|Population||1.392 billion||68.278 million|
|GDP (PPP)||US $ 10.51 trillion||US $ 3.17 trillion|
|GDP per capita||US $ 7,333||US $ 47,089|
|Trade (percent of GDP)||39.47||55,091|
|Export (percentage of GDP)||18,077||27.377|
|Import (percentage of GDP)||18,393||27,724|
|Services, value added (percentage of GDP)||49,266||72.79|
|Agriculture, value added (percentage of GDP)||18.319||0.575|
|Industry, value added (percentage of GDP)||23.199||16,916|
|Ease of doing business (ranking)||63e||8e|
Source: World Bank Database, Department of International Trade (2021)
Currently, there are structural differences between India and UK as UK trade openness is higher than India’s followed by UK service sector being relatively higher than India. The share of manufacturing and agriculture is higher in India with 18.31 percent of contribution as a tertiary economy for India compared to the meager 0.575 percent of UK. In 2021, India is the 15th of the United Kingdome largest trading partner and the UK is the 18the major trading partner with exports of manufactures accounting for over 90 percent of India’s exports to the UK, including clothing, medicinal and pharmaceuticals, metal manufacturers, organic chemicals and gemstones. A major concern for New Delhi would be the reluctance of Downing Street to lower its tariffs and non-tariff barriers (NTBs) below EU levels in agricultural exports, as the share of agricultural exports to the UK has increased. a decrease from 14.4% to 7.85 percent between 2000-2020. India has invested in 120 projects and created more than 5,000 jobs in the UK to become its second source of foreign direct investment (FDI) behind the United States. Since Brexit, the UK has sought to expand its markets and has therefore signed several FTAs, particularly in the Indo-Pacific region, which is home to some of the largest and fastest growing economies. The UK has concluded 68 deals since Brexit and has signed key FTAs ââwith Vietnam, Singapore, Japan, South Korea and Australia, all of which are important UK partners in the Indo region. peaceful. India is a key ally / pillar for the UK in the Indo-Pacific region both in terms of market share and defense, the latter having been highlighted by the signing of the Defense and Security Partnership between India and the UK in 2015 to maintain and strengthen the rules-based international system to combat global threats. The UK is no stranger to the Indo-Pacific region as it already has bases in Kenya, Bahrain, Oman, Singapore and the British Indian Ocean Territory. As a result, the defense partnership with India is gaining momentum albeit slowly.
India has invested in 120 projects and created over 5,000 jobs in the UK to become its second largest source of foreign direct investment (FDI) behind the United States.
In the past, India has pursued FTAs ââwith minimal benefits, however, changes in national and trade policies have the potential to right the mistakes of the past. Signing the Early Harvest deal would provide India and the UK with a wide range of benefits that would help boost economic recovery in the post-pandemic era, and build confidence and momentum before signing the the. India’s renegotiations with its trading partners should complement its national policies, namely âMake in Indiaâ and âAatmanirbhar Bharatâ. Since meticulously planned trade negotiations with supportive national policies can increase India’s exports not only to the UK but also to its other potential economic partners, thus achieving Aatmanirbhar Bharat’s goals of making the India an integral part of the global market. economy. With regard to the United Kingdom, the signing of an FTA with India is at the heart of the British post-Brexit strategy, as India is an emerging market with a large economy, a constantly increasing growth rate. , and with whom he shares a vast historical, cultural experience and diasporic ties make this partnership attractive. The start of the Early Harvest deals will not only mark a new start in India’s perception of trade deals, but also propel its international stature over the next decade, not only as an alternative market to China. , but as the fastest growing and strategic economy in the world. growing region.