India and UK working on a ‘perfect’ free trade agreement 

India and the UK are speeding up talks on the free trade agreement (FTA) and are hoping for an early conclusion, but a definite timeline has not been set so far. Commerce secretary Sunil Barthwal is in London to take the talks forward. UK Prime Minister Rishi Sunak’s visit to India later this month is also expected to give a boost to the talks and efforts are on to conclude the deal by then.

“There has been significant progress in the deal and the aim is for an early conclusion as both countries are heading for elections soon. As many as 19 of the 26 chapters have been finalised,” said a person familiar with the development.

However, the two countries are looking for a “perfect deal” rather than sticking to any tight schedule. It was widely expected that the FTA talks would be concluded by Diwali this year.

There also continue to be some sticking points including rules or origin, tariff and market access for whisky and also the bilateral investment treaty.

According to the source, India is keen on concluding the BIT negotiations along with the FTA talks. “This is one of the major issues under discussion as to whether the BIT should be taken up at a later stage,” the source said. While the ministry of commerce is leading talks on the FTA, the BIT is being negotiated by the department of economic affairs in the ministry of finance.

On whisky, while India is willing to reduce the import duty, it would have to be a more gradual process. At present, the import duty on Scotch whisky from the UK is 150%. The UK has sought that the tariff should be halved to 75% in the first year of signing the FTA and to 30% over a five-year period. Sources indicated that India would do this more gradually over a 10-year period and will lower it to 50%.

“The tariff on whisky is not so much of an issue as even now Scotch whisky from the UK sees robust sales despite the high import duty,” said the source. Another source noted that the tariff will not be a stumbling block. Issues around ageing of the whisky – the UK has a minimum three-year norm for ageing of whisky as against one year in India and two years in the US, also has to be discussed but a compromise is likely.

While India’s diplomatic standoff with Canada has until now not impacted the FTA talks with the UK, sources said this could still turn into an issue given that the UK is a member of the Five Eyes alliance.

Thirteen rounds of negotiations have been completed between the two countries with the last round taking place in September. The two countries began negotiations for an FTA in January 2021. Bilateral trade between countries amounted to $ 20.36 billion in 2022-23 as against $ 17.5 billion in 2021-22.