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Enhanced business ties first step towards UK-India free trade pact

Richard Heald OBE     May 3, 2021

The events of 2020 and early 2021, including BREXIT and COVID-19, have thrown up undoubted hurdles causing us all to think 'outside the box' in our working processes and practices. But they are also causing us to identify new opportunities for re-invigorated collaborations and streamlined supply chains.

Notwithstanding the current COVID related events where again UK-India collaboration is rising to the challenge, there is a real opportunity to look forward and to catalyse new ways of strengthening the UK's bilateral economic relations with our major partners around the world. India is front and foremost on this list, not least because both India and the UK are rediscovering the great potential of working together to tackle common challenges.

In this context, alongside support during the current COVID surge,  a renewed focus on the attainment of a comprehensive Free Trade Agreement (FTA) between India and the UK should be a priority. We have so many building blocks already in place.

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India is the second-largest FDI investor in the UK, and the UK remains one of the largest G20 investors in India, investing an estimated cumulative total of some GBP 21 billion, thereby creating an ecosystem of 2 million more people within or dependent upon their indigenous supply chains. All of this is currently sustained through a combination of Ease of Doing Business (EoDB) reforms and WTO rules.

Surely, this parallel and existing commitment in each other's peoples and economies must be a firm foundation on which to establish further a rules-based system of economic relations between India and the UK, driving mutually beneficial growth over the coming years.

Much has already been achieved in B2B and B2C-related activities. The renewed effort being placed on strengthening interactions at a G2G level with the ultimate goal of an FTA is particularly encouraging. B2G forums such as the Joint Economic and Trade Committee (JETCO) and UK-India CEO Forum, for which the UKIBC serves as UK secretariat, are an important bridge.

Todays' FTAs are 'living documents' that adapt to the rapidly changing circumstances of economic life. Upon re-election in 2019, Prime Minister Narendra Modi set India a goal of becoming a $5 trillion economy in the foreseeable future.

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His ambition to create a vibrant, indigenous economy with more domestic and sustainable supply chains - in sectors such as manufacturing, global supply chains, IT, waste management, healthcare, and infrastructure - underpins his cornerstone policies of 'Make in India' and 'Atmanirbhar Bharat' (self-reliant India). At the same time, the UK is focused on improving its existing relations and investments in India as well as encouraging Indian investment into the UK.

It is heartening to see that there is an increasingly evident alignment of interests. This mutuality of ambitions bodes well for potential common areas of development in digital technology in both India and the UK in critical areas such as health-tech and ed-tech. Moreover, both India and the UK are also amongst the world's climate-change leaders. With the UK hosting COP26 in November 2021 and heavily investing in wind energy among other solutions, there is great room for collaborative growth here.

At the same time there is much to do. The UKIBC's Doing Business in India report finds that the most frequently selected obstacle to doing business in India, as per UK businesses, is 'legal and regulatory barriers' like 'foreign exchange regulations', 'goods and services tax', 'import tariffs', 'alignment with international standards' and 'incorporation of company'.

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The Joint Trade Review, the Enhanced Trade Partnership, and the eventual FTA are important elements in a strong vibrant and sustainable partnership with India. They are constituent elements of an iterative process that will build upon and enhance relationships which already exist. The necessities and priorities of both India and the UK are driving bilateral investment by businesses in each other's economies and increased dialogue on a G2G level.

2021 will see significant multilateral events which should further enhance collaboration and co-operation - COP26; CHOGM; G7/D10 - as well as the upcoming dialogue between UK and India that is poised to offer several opportunities for bilateral trade growth and cooperation between both our countries. While our focus is and should be on immediate COVID related challenges, I am confident that 2021 will also pave the way for a new dimension of economic cooperation between India and the UK.

(Richard Heald is the Group Chair, UK India Business Council (UKIBC). Views expressed are personal.)

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