The interim agreement will serve as a precursor to achieving a comprehensive FTA between the fifth and sixth largest economies in the world. Total trade between India and the UK stands at $ 24 billion by 2020, with an investment of $ 31.4 billion over the past two decades. Multilateralism has had limited results in recent times, India is in the process of finalizing a series of bilateral trade agreements with the United Kingdom, Australia, Canada, Israel, and the European Union. In the meantime, we are awaiting the third round of India-UK FTA negotiations.
India is said to be the highest tax destination, yet it is interesting to note that 94 per cent of Indian imports from the UK account for less than 13.5 per cent. The main exception is the ‘beverage, spirits and vinegar’ sector which has a tax value of 107.6 per cent, making up 2.6 per cent of all goods purchased.
UK
About 80 percent of the 2.6 percent mentioned above are scotch whiskey, with a price tag of 150 percent. Cars manufactured in Britain are also subject to a 125 percent tax. These two issues are a major point of contention, and in the ongoing FTA negotiations, London seeks to reduce these costs. There will also be discussions on better access to Indian agriculture, as well as a market for value-added dairy products.
By comparison, more than 98 per cent of India’s exports to the UK fall within 12 per cent of the high cost of processed foods and tobacco products. However, India will also be expecting greater access to its textiles and clothing, as well as engineering goods to the UK market.
World leader in service delivery
Therefore, if there is an FTA, India will have to offer major agreements on tax cuts, much higher than in the UK with already low tax rates. But without a doubt, the total trade between India and the UK will rise before the FTA. Considering that both countries are major service providers, there is a basic opportunity for both parties to align their interests, and act accordingly. This will improve relations and help them become world leaders in the export of services.
An initial study by India Exim Bank estimated that under some speculation in this model, a special trade agreement between India and the UK could lead to an increase in Indian purchases of $ 2.3 billion, and a net loss of 385.7 million revenues. . India’s exports could increase by $ 245.1 million with an expected loss of $ 110.5 million in the UK. As imports serve as imports, cheaper imports also reduce export costs, thus making them more competitive in the international market.
India can improve investment from the UK by allowing its service providers to establish operations in India, and partner with Indian companies, thereby adding to its market awareness. The Indian insurance and banking sectors are of great interest in the UK. India should use its position to advance the movement of the people and provide the much-needed civil protection agreement to the UK Indians.
Similarly, Indian manufacturers can gain advanced knowledge of UK technology in the field of renewable energy and electric vehicles. Both countries need to enter into an equally beneficial treaty, which includes goods and services, investment, and mobility.
Considerations in Conversations
During the broader FTA negotiations, instead of focusing solely on the product list of tax contracts, the focus on products on the critical / negative list where tax clearance will be limited to protect the interests of the sector. India should seek to reduce tax-free barriers facing Indian exports as in the case of the dairy sector. This enables both countries to work towards ‘Joint Recognition Agreements’.
Like India-UAE CEPA, strict origin law should be enacted to monitor the importation of imported goods and the permanent security of both countries to deal with any sudden increase in imports. The FTA also needs to address the problem of perverted labor to ensure that raw materials are substandard, without any delicate materials – this will further help India rise in the global value chain, and improve Make in India by promoting production in India.
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