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First Post
7 days ago
- Business
- First Post
India-UK FTA: A bold new trade era set to take off
As Prime Minister Narendra Modi undertakes his fourth visit to the United Kingdom this week, the economic relationship that India has with the country has come into focus afresh. Both countries are going to sign a free trade agreement (FTA) during the PM's visit, which is his first since Keir Starmer came to power. The signing of the FTA will mark the culmination of three-year-long negotiations, a process that started in the year 2022 and saw both countries iron out significant differences to achieve a mutually beneficial deal. Once operational, this trading agreement is expected to boost India-UK bilateral trade from its current volume of $55 billion to $120 billion by 2030. STORY CONTINUES BELOW THIS AD The UK remains a key economic partner for India and is also the sixth-largest investor in India, with cumulative investments of around $36 billion. India itself is a key contributor to the British economy, with at least 1,000 Indian companies operating in the country, employing more than one lakh people, with a total investment of $20 billion. Inking an FTA with an emerging economic powerhouse like India is significant for the UK, and maybe this is why they have called it their 'biggest and economically most significant' bilateral agreement since exiting the European Union. For India, this FTA is equally important, as the country is an important market for Indian exports—one with which it also enjoys a modest trade surplus. The FTA is also crucial because it is one of those agreements that India has signed after overhauling its approach to trade liberalisation under the leadership of PM Modi. In 2014, when Modi came to power, one of the first things on his priority list was to review the existing trading arrangements that India had with countries across the world. Prior to this, the previous government had indiscriminately signed FTAs regardless of whether they were securing market access for Indian products or not. Within a decade, India had signed trade agreements with Singapore, ASEAN, Japan, South Korea, among others. This one-sided economic liberalism did provide the UPA coalition with an image of a progressive government that was doing a 'lot' for the country's economy, but by the time they went out of power, India's trade deficit with key countries—including China (with which there was no FTA but just ambitious bilateral trade targets)—had zoomed to unsustainable levels. The India-ASEAN FTA particularly faced a huge domestic backlash because it made India a dumping ground for cheap offerings, while Indian products struggled to survive. STORY CONTINUES BELOW THIS AD Naturally, the issue of the trade deficit and India's lack of capacity to compete in the global market was of grave concern to the Modi government, which preferred to adopt a strategic approach to FTAs—one that focused on securing market access for Indian products on a reciprocal basis. This was more than evident when his government put a pause on signing FTAs till 2021 and even withdrew from the China-dominated Regional Comprehensive Economic Partnership (RCEP). Though Modi faced a lot of flak from his detractors—who called him a socialist, a protectionist, and considered his move to not sign FTAs as adversarial to India's economic interest—he did not budge, as if he knew what was best to protect the country's economic interests. While a strategic pause was put on signing new trading agreements and a careful review of the existing ones was being undertaken, his government took concrete steps on one very important front—building India's indigenous manufacturing capacity so as to compete effectively at the global level. The spirit of Aatmanirbhar Bharat, the early launch of the 'Make in India' program, and the game-changing Production-Linked Incentive Scheme were some of the essential steps that were taken before actually boarding the FTA wagon again. STORY CONTINUES BELOW THIS AD Along with this, the government was also planning a new approach to integration with the global economy, where emphasis was on using this integration to boost India's economy and not just become a market open to exploitation by much more developed countries. When India signs the FTA with the United Kingdom this week during PM Modi's visit, the changed approach to bilateral trading arrangements would be more than visible. Because this time, it has literally put in unprecedented efforts to negotiate a favourable deal with a much-developed economy. The FTA with the UK is set to provide duty-free access to 99 per cent of Indian goods, with key sectors such as automobiles—including electric vehicles—engineering goods, sports goods, and even services benefiting. Most importantly, India, being a labour-intensive economy, will gain access to a wide market, particularly for its leather products, apparel and footwear, toys, marine products, and gems and jewellery. In the last decade, the Modi government's efforts to revive the electronics sector—making it a leading engine of the country's manufacturing story—will be suitably rewarded by this trade deal, as electronics exports from India to the UK have already surged from $450 million in 2020 to $1.7 billion in 2023. India's textiles sector will also benefit from the FTA, which already exports knit apparel and raw materials worth Rs 1.5 billion to the United Kingdom annually. The sheer scope of job creation due to a boost in these exports is going to be huge, with the country's large and cost-wise globally most competitive labour force finding meaningful avenues for employment. STORY CONTINUES BELOW THIS AD Interestingly, India has also allowed for liberalisation in the auto sector—but on a strictly reciprocal basis and that too with well-thought-out caution in place in the form of a quota-based easing of tariffs. This will definitely provide traction to Indian automakers in the UK market, unlocking newer opportunities for them. Another interesting aspect of the trade deal is India's access to the British public procurement market. This means Indian firms will be handed non-discriminatory treatment while applying to fulfil public procurement tenders floated by the UK government. While the exact figures for the UK's total procurement are not available, it is estimated to be an opportunity worth hundreds of billions of pounds that Indian suppliers can now readily tap into. In return, India has also allowed UK-based businesses to participate in public procurement contracts—but only in non-sensitive sectors, with a caveat that they must have at least 20 per cent Indian content. STORY CONTINUES BELOW THIS AD Along with other wins, a crucial victory for Indian negotiators is the provision for exemption from UK's social security contributions in the form of the Double Contributions Convention Agreement (DCCA). Due to this, Indian workers who are temporarily in the UK—and their employers—will not have to contribute anything towards social security in the country, thus leading to savings of around 20 per cent of their salaries. This will set a good precedent for other developed countries to follow with India. India's unexplored side as a tough negotiator has really come to the fore through this deal, as India has also secured exemption for sensitive agricultural products such as dairy products, apples, cheese, oats, etc., which would have collapsed due to fierce competition from British products in the category. Even sensitive industrial goods that need protection before they can compete globally—such as plastics, optical fibres, TV camera tubes, etc.—have also been excluded from the deal. On certain other goods, India has agreed to cut duties only on a gradual basis over a longer period of time. This also includes liquor, where duties will be reduced only over a period of ten years so as to protect the domestic market. STORY CONTINUES BELOW THIS AD This week, when PM Modi signs the FTA with the UK, it will not only signal India's new-found willingness to integrate with the global market, but it will also demonstrate its resolve to do it only on beneficial terms. The days of signing FTAs for the sake of appearing liberal and seeking validation from economists are over for India. This dispensation has shown that it is willing to walk the talk of trade liberalisation with the developed world—but only when it also boosts the country's own economy. The agreement is an example of India's growing assertiveness in the domain of foreign economic policy, and other developed countries who are looking to seal a deal with India must duly take note of it. The author is a New Delhi-based commentator on geopolitics and foreign policy. She holds a PhD from the Department of International Relations, South Asian University. She tweets @TrulyMonica. The views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost's views. STORY CONTINUES BELOW THIS AD
Indian Express
20-07-2025
- Business
- Indian Express
Trade SOP in limbo, India takes novel approach in ‘dynamic' talks with US
As uncertainty over the India-US interim trade deal continues following the conclusion of an extended round of negotiations, the Ministry of Commerce and Industry has adopted a fresh approach — operating outside the purview of the standard operating procedure (SOP) which has been under preparation since last year —to respond to challenging US demands, The Indian Express has learnt. The Ministry had begun preparations in May last year to compile a 60-page SOP to address the lack of consistent and streamlined procedures for negotiating future trade agreements. This was aimed at guiding the process of launching, conducting, and concluding trade negotiations, and addressed issues such as human resource mobilisation, negotiation team formation, and the composition and hierarchy of negotiating teams. 'The SOP for trade negotiations, which was supposed to be finalised by the top brass of the government, could not be completed due to internal disagreements. As far as the US deal is concerned, negotiations had to be conducted outside the scope of the SOP to tackle the dynamic nature of US trade negotiations,' a government official said on condition of anonymity. US President Donald Trump had initially set a July 9 deadline for countries to sign a trade deal and avoid steep reciprocal tariffs, later revising the deadline to August 1. Trump also announced fresh tariffs on dozens of countries, including Canada, the EU, Brazil, and several ASEAN nations. However, he stated that a deal with India is close. While extensive consultations with industry — ranging from textiles to automobiles — have been taking place, several farmer bodies and state ministers have begun raising concerns over the lack of consultation during the ongoing negotiations for the US deal, which could involve opening up India's agricultural market. Kerala's Minister for Agriculture, P Prasad, said earlier this month that the livelihoods of lakhs of Kerala's rubber, coconut, dairy, and poultry farmers could be at risk if the Centre fails to protect Indian farmers' interests in the negotiations. Prasad said that Kerala had not been consulted on the deal and added that the India-ASEAN trade agreement had previously had a negative impact on the state. The Indian Coordination Committee of Farmers Movements (ICCFM), representing farmers from 11 states, said agriculture should be excluded from the trade deal. It highlighted that the US is one of the world's largest exporters of synthetic rubber. 'The US is one of the biggest exporters of synthetic rubber. Synthetic rubber imports have seriously impacted the farm-gate price of natural rubber in India. India imported Rs 1,556.54 crore worth of synthetic rubber and related products from the US in 2017–18, and Rs 71,490.73 crore in 2018–19. If India reduces import duties on synthetic rubber from the US, it will severely affect rubber farmers,' the ICCFM said. Farmers also warned that if India signs a trade deal with the US, the latter could import raw sugar from Brazil, process it in the US, and then export it to India—hurting the domestic sugar industry. Ravi Dutta Mishra is a Principal Correspondent with The Indian Express, covering policy issues related to trade, commerce, and banking. He has over five years of experience and has previously worked with Mint, CNBC-TV18, and other news outlets. ... Read More
The Diplomat
15-07-2025
- Business
- The Diplomat
Jaishankar's Singapore Visit: An Opportunity to Take Stock of India-Singapore Ties
Jaishankar's visit not only provided an opportunity to follow up on the action plan developed earlier but also to deliberate upon new avenues of cooperation between the two nations. As India and Singapore commemorate 60 years of their diplomatic relationship and 10 years of strategic partnership, Dr. S. Jaishankar, India's external affairs minister, paid a visit to the Lion City. Jaishankar's short but timely visit should be seen in continuation with Singaporean President Tharman Shanmugaratnam's five-day visit to India in mid-January 2025. During Tharman's visit, the two countries worked toward developing an action plan this year, as suggested by Indian Prime Minister Narendra Modi during his last visit to Singapore in September 2024, when India and Singapore elevated their relationship to a Comprehensive Strategic Partnership. Jaishankar's visit not only provided an opportunity to follow up on the action plan developed earlier but also to deliberate upon new avenues of cooperation between the two nations, considering the challenges posed by U.S. President Donald Trump's tariff policies and the heightened tensions between the United States and China over semiconductors and critical minerals. Both India and Singapore are facing Trump's tariffs, but their situation is considered much better than peers such as Malaysia, Indonesia, Japan, and South Korea. The significance of the visit also lies in the fact that it will allow Singapore to find ways in which India can still work with ASEAN on the free trade agreement (FTA) front. According to the reports, India, unhappy with the sluggish pace of the review of the India-ASEAN FTA and a consistent negative balance of trade, is considering terminating the trade deal, which came into force in 2010. Singapore, as India's topmost trading partner in the ASEAN region and a hub for Indian services sector trade in the region, would want India to stick to the FTA. However, Singapore will also seek to explore avenues of enhancing bilateral trade and investment cooperation should India decide to walk out of the free trade agreement. Beyond a robust trade in goods, India and Singapore are working together in new areas such as semiconductors, digital cooperation, healthcare education, skill development, petrochemicals, sustainability, and maintenance, repair, and overhaul (MRO) in the aerospace sector. Singapore's investment in India is a win-win scenario for both. While India is striving toward becoming a 'Vikshit Bharat' by 2047, its current infrastructural gap, high operational costs, land acquisition, and lack of skilled labor remain the hurdles that a developed country like Singapore can help it cross. Similarly, despite having all the above-mentioned resources, Singapore has a high cost of labor and services. As a result, investors in Singapore are looking abroad to invest. While China heavily dominates the Southeast Asian economy and there is high competition among ASEAN countries, given India's close ties with Singapore and cost-effective labor and service, New Delhi presents a viable option to Singapore. India desires to become a semiconductor hub. However, it currently faces a shortage of resources and professionals across the various verticals of the industry. The India Electronics and Semiconductor Association (IESA) had plans to send some of its workforce to Singapore for semiconductor training. The signing of an MoU between the Skill Development & Technical Education Department, Odisha, and the ITE Education Services (ITEES), Singapore, during the Singapore president's visit, has enabled the two countries to train a large portion of the Indian workforce in the country itself. Similarly, Singapore dominates the MRO sector, while India aspires to become a global hub for MRO. India's MRO market is currently valued at $1.7 billion, projected to grow to $4 billion by 2031. While the Indian government has introduced reforms for simplified tax structures and is collaborating with companies like Airbus and Hindustan Aeronautics Limited, high operational costs, infrastructure gaps, skill shortages, and regulatory bottlenecks present challenges to India's vision. Therefore, collaborating with Singapore will help New Delhi fulfill its aspiration. While the Indian government has been working to strengthen ties with Southeast Asian countries, many Indian states – to fulfil their individual goals – are also trying to reach out to Southeast Asian countries. Tharman's visit to Odisha followed the visit of Odisha's chief minister to Singapore. Notably, Singapore is the official partner in Odisha's flagship biennial investors summit Utkarsh Odisha (Make in Odisha Conclave-2025). Like Odisha, other Indian states are also trying to lure investments from Southeast Asian countries by reaching out to them, reflecting the success of Indian paradiplomacy. For instance, in early 2025, Assam's IT and Science and Technology Minister Keshab Mahanta visited Thailand to promote the Assam 2.0 Investment and Infrastructure Summit and invited Thai businesses and investors. Additionally, Singapore is already developing a satellite city around Guwahati – the capital of Assam. Last year, in January 2025, during the Tamil Nadu Global Investors Meet, Singapore laid out its plan to invest $5 billion in infrastructure, technology, sustainability and data centers. Furthermore, Singapore and Tamil Nadu are establishing a green corridor from Tuticorin in Tamil Nadu to Singapore. Despite all the opportunities and initiatives, as Tarun Das – an Indian industrialist who was recently conferred honorary citizenship by Singapore – pointed out, there remains a 'communication gap between India and Singapore with two very different systems and processes.' Due to the arduous land and registration process, high tax on construction, and complex paperwork, among other factors, mid-size Singaporean companies are still uncomfortable setting up businesses in India. Das suggested that India can offer 'townships' to Singapore, similar to the ones offered to Japan and South Korea. These townships are industrial zones providing a streamlined environment for companies to initiate and expand their operations in India, reducing administrative hurdles. The India-Singapore partnership offers promising potential, particularly in the context of challenges and vulnerabilities thrown open in the regional context. Jaishankar's visit will help address some of these while opening a pathway for further consultations.
The Hindu
10-07-2025
- Business
- The Hindu
Looking to fast-track trade pact review talks with ASEAN: Piyush Goyal
Commerce and Industry Minister Piyush Goyal on Thursday (July 10, 2025) said discussions are under way with ASEAN to review the existing trade pact, and he is looking forward to fast-track the negotiations. The issue figured during the meeting between Mr. Goyal and his Malaysian counterpart T. Zafrul Aziz. "Had a productive meeting with @Tzafrul_Aziz, Malaysian Minister of Investment, Trade & Industry. Malaysia is India's permanent coordinator from ASEAN on economic matters," Mr. Goyal said in a post on X. The Ministers discussed the ongoing review of ASEAN India Trade of Goods Agreement (AITIGA) and addressing its challenges therein. No headway in India-ASEAN trade deal review despite 9 meetings in last one year "Looking forward to fast-tracking discussions with ASEAN Member States to ensure fair trade and balanced growth," he said adding, "We also discussed furthering discussions on the Comprehensive Economic Cooperation Agreement (CECA) between both the countries". The remarks assume significance as the review talks are progressing slow. The review of the agreement is a long-standing demand of Indian industry, and India is looking forward to an upgraded pact, which will address the current asymmetries in bilateral trade and will make trade more balanced and sustainable. ASEAN members include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. A free trade agreement in goods between India and the 10-nation bloc ASEAN (Association of Southeast Asian Nations) was signed in 2009. The ASEAN trade deal came into force in January 2010. In August 2023, both sides announced a complete review of the existing agreement on goods by 2025.
Economic Times
21-06-2025
- Business
- Economic Times
India engages with ASEAN after Piyush Goyal's remark
PTI Commerce Minister Piyush Goyal New Delhi: India and ASEAN engaged in quiet diplomacy on Friday to reaffirm ties, a day after Commerce and Industry Minister Piyush Goyal's unexpected comments sparked unease across Southeast Asia. Speaking at the India Global Forum in London, Goyal criticised past trade agreements with ASEAN nations, calling them "silly" and claiming several countries had become the "B-team of China" by allowing indirect entry of Chinese goods into India through preferential trade routes. The remarks came as a surprise, especially with 2025 marking 30 years since India became a full dialogue partner of ASEAN. The comment also came months after Indonesia's President was invited as chief guest for India's Republic Day celebrations, and ahead of planned visits by leaders from the Philippines, Singapore, and Vietnam later this Friday, India sought to dial down tensions. At a forum in Jakarta, P. Kumaran, Secretary (East) in the Ministry of External Affairs, strongly endorsed the India-ASEAN relationship. "Our ties are based on civilisational links, shared values and common aspirations," he said, adding that both regions are fast-growing and central to shaping the Global South's future. Kumaran highlighted India's growing engagement with ASEAN across more than 40 dialogue mechanisms. He also outlined collaborations in critical minerals, semiconductors, cross-border payments, and digital connectivity.
