India-UK trade deal not historic but should help Indian workers in UK: Swaminathan Aiyar
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Consulting Editor,
ET Now,
suggests that while the UK trade agreement may not drastically alter the overall scenario due to existing low trade levels, any increase is beneficial. A significant achievement is the improved conditions for Indian workers in the UK, including exemptions from social security contributions and the ability to work remotely in 35 sectors, enhancing their earnings.
India-UK Bilateral trade currently stands at $21 to $24 billion, with targets to hit $120 billion by 2030. Is that leap realistic? What must happen to bridge the gap there?
Swaminathan Aiyar:
Well, to say it is historic is a clear exaggeration. It is a useful thing. We live in a world right now where trade barriers are going up and it is happening all over the place, not just in the USA. Others in retaliation are putting theirs up. We ourselves have retaliated. On some occasions we have put ours up. So, when you get any agreement where there is a significant amount of liberalisation of trade, I would say it is welcome.
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If you go back to the 1950s, Britain was our largest trading partner; today it is not even in the top 10. So, it has fallen away in importance. The old colonial connection is completely severed and Britain itself has suffered a substantial amount of deindustrialisation. And if you ask what are the main exports of England's, somebody will say Premier League football or The Economist. It does export scotch whiskey of course and that is where the duty is going to come down from 150% to 75%, subsequently maybe to 40%. That still gives plenty of protection for Indian industry.
For anybody who is worried, I need to emphasise that we now have two or three artisanal whiskey companies in India which in blind tasting have beaten everybody else. Now, of course, we are not mass-producing these things. Indri will have a small batch run. It is not like the continuous mass production of some famous scotch names, but we are competent and we are high class even in something like whiskey. So, I welcome the increased competition out there too. India itself will benefit significantly in various ways.
My next question is which sector is poised to benefit the most after this deal?
Swaminathan Aiyar:
At the end of it all, this freeing of trade will change things. But if already the UK is not among your top 10 trading partners, you cannot expect this to really change the whole scenario. If already the trade is low, it means the complimentarity between the two countries is not that high. It is much higher with China and the USA and much less with the UK. So, the overall scope for trade is limited, but we are increasing it and every increase is a good thing.
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We have often talked about improving the conditions for Indians to move to the UK for work. This used to be one of the things that was holding up an agreement. There, we have a good deal. Indians can work in 35 sectors for two years without any office and that means you can land up there and just work from your residence with zoom and you can be functioning without going through all the difficulties of setting up a formal sector and there is an exemption for social security. This is important. A significant part of your salary, anything you earn when your people go to the UK, is cut and goes towards your long-term pension.
Our fellows are going there to do IT or other work for one year, for two years, for three years, so there is no point in them paying into social security when they will get nothing out of it once they retire. You have to work a very large number of years before you can get those benefits. Earlier they resisted it and said they were not going to do it. The United States still has not allowed this, but Britain has given what the United States has not given and this is very useful.
I do not know the exact rates of the deduction for different categories, but 10-15% or sometimes 20% of your salaries went in these various deductions. If that gets reduced, there is that much more these Indian professionals will be able to send home. So that is a positive thing.
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