The 24 October deadline set by Boris Johnson for finalising the UK–India trade deal will be missed after both parties have hit a roadblock in discussions.
Although a detailed reason hasn’t been given by both sides, sticking points include a steep import duty on British whisky for sale in India, and demands for more visas for Indian students and businesses.
Prime Minister Liz Truss previously hailed this deal as a prize for Britain, with India’s £2 trillion economy likely to inject £3bn into the UK’s economic growth by 2035 when it goes through.
Her comments came after her predecessor, Boris Johnson, and Indian Prime Minister Narendra Modi agreed in April of this year in New Delhi that there would be a “trade deal by Diwali”, which is this coming Monday, on 24 October.
Now, experts have said that the deal may not be signed until next year, at the earliest.
Amidst Britain’s current trade and economic frictions, the completion of a trade agreement with India could pump billions more into the economy, generate further employment opportunities, attract skilled talent to fill a severe shortage, and improve digitalisation and tech expansion.
Vital post-Brexit prize
Reaching an agreement is of critical importance for Britain, especially as the country continues to navigate through deep waters following soaring inflation and the most recent drop in the pound’s value.
As a testament to the importance of getting this deal over the line, the increased value of imports and weak export performance also resulted in the UK trade gap widening to a near record-high in the three months to July, according to the Office for National Statistics (ONS).
The data additionally revealed that trade deficit in goods and services rose from £1.2bn to £27bn during this period, compared to the previous quarter.
The UK–India investment relationship is already worth £27.5bn and supports 110,000 jobs across the UK.
This represents an increase of 35.2 per cent or £6.7bn compared to 2021, but experts assert that although this growth is impressive, the FTA could cause the total value of bilateral trade to double by 2030, which would have profoundly positive effects on the UK economy.
Fastest-growing economy this year
This comes after India surpassed Britain to become the world’s fifth largest economy, marking a milestone achievement for the country.
India has just signed two new deals with United Arab Emirates and Australia while in the meantime, the US has signalled that a deal with the UK is off the table in the short run – meaning that the partnership with India remains one of crucial importance.
London-based Nayan Gala, founder of global investment banking platform, JPIN, and expert on the UK–India corridor, explained to City A.M. why a UK–India trade deal is critical for Britain’s economic growth.
“India is on track to becoming the third largest economy by 2050, which is why this marks a critical period for the UK to lock in a deal as soon as possible,” Gala pointed out.
In fact, on track to become the fastest-growing economy by the end of this year, India already projected to be a fifth larger than the UK by 2027, according to the International Monetary Fund (IMF).
Gala highlighted that the UK-India relationship already supports 110,000 jobs in the UK, and foreign investment into Britain from India was worth £10.6bn in 2020, “but this could just be the beginning of an even more fruitful relationship.”
“There is a need for the UK government to forge new trade partnerships in order to not only reduce its’ trade deficit, but to also generate new opportunities beyond Europe at a time when economies around the world are facing significant macro-economic headwinds,” Gala continued.
“Finalising this trade deal could also reduce tariffs on rice, clothes and cars which could have a positive impact on households across the nation currently struggling with the cost-of-living.”
“At a time of economic uncertainty, it’s now paramount that any final details are ironed out so that an agreement can be reached which will hugely benefit both economies,” Gala concluded.