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What a Labour election win could mean for India-UK Free Trade Agreement (FTA)?


From UPSC perspective, the following things are important :

Prelims level: Geographical features of UK

Mains level: India UK Relation

Why in the news?

New Delhi and London have been engaged in negotiations for over two years to discuss a proposed free trade agreement (FTA) aimed at enhancing bilateral trade between the two nations.

What does the agreement could result?           

  • Mutual Tariff Reductions: Both countries may agree to lower tariffs on a wide range of goods, including automobiles, textiles, alcoholic beverages, and medical instruments, facilitating increased trade flows.
  • Market Access: Improved market access could benefit industries in both countries, particularly India’s IT and services sectors, which are seeking expanded opportunities in the UK market.
  • Economic Growth: The FTA aims to stimulate economic growth by promoting trade and investment, potentially boosting employment and productivity in relevant sectors.
  • Political Relations: Strengthening economic ties could lead to closer political cooperation between India and the UK, influencing bilateral relations on international platforms.

Impact on Global Geopolitics and Indian Scenario

  • Global Trade Alliances: Strengthening economic ties between India and the UK could enhance their geopolitical influence, potentially shaping global trade alliances and partnerships in the Asia-Pacific region and beyond.
  • Diversification of Trade Partnerships: For India, the FTA represents a strategic move to diversify its trade partnerships beyond traditional allies, thereby reducing dependency and enhancing economic resilience.
  • Improve Bilateral Relations: Improved economic cooperation could foster closer political relations between India and the UK, influencing diplomatic engagements and collaboration on global issues such as climate change and security.
  • Regional Economic Impact: The agreement may spur economic growth in India, particularly benefiting sectors like IT and services, while also contributing to the UK’s post-Brexit economic strategy and trade diversification efforts.
  • Influence the Environmental and Regulatory Standards: Negotiations over environmental standards, including India’s concerns over carbon taxes and the UK’s climate goals, highlight the FTA’s potential to influence global environmental policies and regulatory frameworks.

India-UK Relation: 

  • Strong historical ties: India and the UK share deep historical and cultural connections dating back to the colonial era. The UK has a large Indian diaspora of over 1.5 million people.
  • Strategic partnership: In 2004, India and the UK upgraded their relationship to a Strategic Partnership. This was further strengthened by the ‘2030 Roadmap for India-UK Future Relations’ agreed in 2021, which outlined cooperation across 5 pillars- people-to-people ties, trade, defence and security, climate change, and health.
  • Growing trade and investment: The UK is one of India’s major trading partners. Bilateral trade reached £38.1bn in the year to Q3 2023, making India the UK’s 12th largest trading partner. India is the 3rd largest foreign investor in the UK. Both countries are negotiating an India-UK Free Trade Agreement to further boost economic ties.
  • Cooperation in new frontiers: India and the UK are collaborating in emerging areas like fintech, green finance, cyber security, and critical technologies. They plan to hold the first Strategic Tech Dialogue to deepen cooperation in areas like semiconductors, 5G, and AI.
  • Shared global outlook: India and the UK have convergent views on many global issues and support a rules-based international order. The UK supports India’s permanent membership of the UN Security Council. They also cooperate closely on maritime security in the Indo-Pacific

Way forward: 

  • Addressing Key Negotiation Points: Focus on resolving critical issues such as tariff reductions, market access for IT and services sectors, and alignment on environmental standards to expedite FTA conclusion.
  • Enhancing Strategic Partnerships: Strengthen bilateral economic and political cooperation through sustained dialogue and proactive engagement, aiming to maximize mutual benefits and ensure the long-term sustainability of the FTA.

Mains PYQ:

Q The judicial systems in India and the UK seem to be converging as well as diverging in recent times. Highlight the key points of convergence and divergence between the two nations in terms of their judicial practices. (UPSC IAS/2020)

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