It’s advantage India

British PM’s proposed visit provides an ideal opening for Modi to initiate discussions for a free trade deal

AuthorPublished: 28th Dec 2020  12:00 amUpdated: 27th Dec 2020  9:29 pm

A plethora of new opportunities beckons India as the United Kingdom and the European Union (EU) finally conclude the Brexit deal after prolonged and tortuous negotiations. Just a week before the Brexit transition period was slated to end on December 31, the EU and the UK announced the reaching of an agreement that will govern the trade and security relationship between the two sides, starting January 1, 2021. It was more like a messy divorce deal coming through, a divorce decided by the people of Britain but their politicians found it extremely difficult to deliver. The larger global implications apart, the deal certainly augurs well for India’s service exports. As per the Brexit trade and security deal, British citizens will no longer enjoy unrestricted freedom to work, study, start a business or live in the EU and vice versa. Indian companies have an advantage because the deal allows them to sell to EU markets not only at zero Customs duty but also without any quotas being imposed. The deal will help large Indian investments in pharma, steel and engineering in the UK as there will be no limits to the volumes they can sell into the EU. India’s service sector will emerge as the biggest beneficiary because bilateral services trade between the UK and the EU is substantial. As far as the IT sector is concerned, Poland is the closest competitor for India in the EU market. Since Poland will have restrictions on the free movement of professionals post-Brexit, it may work to the advantage of India.

It also gives India an opportunity to sign trade deals separately with the EU and the UK. The upcoming visit of British Prime Minister Boris Johnson, as chief guest at the Republic Day celebrations, provides an ideal opening for Prime Minister Narendra Modi to initiate preliminary discussions for a Free Trade Agreement (FTA) between the two countries. This can be followed up with recalibrated offers to the 27-member EU bloc for tariff reductions, factoring in the changed realities. Ever since the Brexit decision in June 2016, both India and the UK have been keen on initiating dialogues on the FTA but could not make headway without a formal divorce deal between London and Brussels. Any India-UK trade talks won’t have the same level of complications that exist between India and the EU. Now, an FTA with the UK is possible without hiccups. On its part, Britain is unlikely to be rigid over issues that were the sticking points in the past negotiations for an India-EU FTA. Since pulling out of the China-dominated Regional Comprehensive Economic Partnership (RCEP), India has been seeking to expedite trade talks with large markets.


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