India (Commonwealth) _ The India-UK free trade agreement (FTA) is expected to bring India relatively small gains because many of its exports to the UK currently enjoy low or no tariffs, according to a study paper recently published after a rigorous comparative study on the trade between the UK and India.
This occurs while both nations hold rapid-fire negotiations to sign the FTA by the end of the month. Later this month, India is anticipated to host UK Prime Minister Rishi Sunak.
A major increase in Indian exports to the UK will ultimately depend on product quality improvements rather than the FTA alone, according to the Global Trade Research Initiative (GTRI). While textiles, garments, footwear, agricultural products, and some other items stand to benefit from tariff reductions, GTRI stated.
The exports of India’s labor-intensive goods might not significantly grow as a result of signing an FTA alone. For instance, the FTA did not significantly increase India’s textile and garment exports to Japan. India’s exports to Japan increased from $257.7 million to $368.6 million between 2007-09 and 2019-21, a cumulative growth of 43.1%, whereas India’s overall exports increased by roughly 67.9% during the same time period, according to a report from GTRI.
It was added that natural growth factors rather than the FTA could be responsible for the minor increase in exports to Japan. India imposes high duties on UK exports, particularly on goods like vehicles, Scotch whiskey, and wines. The FTA might result in lower tariffs being applied to these products, thereby creating new opportunities.
However, the research noted that India’s unwillingness to lower tariffs in other industries, such as dairy, because of political sensitivities emphasizes the need for selective import liberalization to improve domestic quality. British cars are subject to a 100% duty in India, while Scotch whisky and wines are subject to a 150% tariff. India imposes a 14.6% basic average tariff on products imported from the UK.
Indian exports to the UK totaled $11.41 billion, of which $6 billion was made up of duty-free imports of items like airplanes and petroleum products. According to a research group, India’s high-quality, labor-intensive products would benefit from the UK’s abolition of import taxes under the proposed free trade deal between the two nations.
According to the planned free trade deal between the two nations, the UK’s abolition of import levies would be advantageous for India’s high-quality, labor-intensive products. According to the think tank, the removal of import duties will assist India’s products including clothing, shoes, carpets, and autos.
According to the Global Trade Research Initiative (GTRI), these advantages will be modest because the vast bulk of Indian commodities currently enter the UK with little to no tariffs, according to PTI. Notably, India sent commodities to the UK valued $11.41 billion in 2022–2023; $6 billion of these goods, including petroleum products, medicines, machine parts, and airplanes, entered the UK duty-free.
As a result, it is anticipated that the FTA won’t have much of an influence on increasing exports since more than half of Indian goods already have low or no tariff access to the UK. According to GTRI co-founder Ajay Srivastava, the average tariff on items imported into the UK from India is 4.2%. Decreased duties would benefit India’s $5 billion worth of exports, which include textiles, clothing, footwear, carpets, automobiles, marine items, grapes, and mangoes. According to Srivastava, these products often face low to moderate tariffs in the UK.
The two countries are currently in the middle of negotiations, which are currently taking place in New Delhi and are anticipated to be finished by the end of the month. GTRI said that signing an FTA might not be enough to support the expansion of Indian exports and that significant improvements in product quality are required.
