The India-UK Free Trade Agreement (FTA) is poised to deliver limited advantages for India, according to a recent research report. While both countries are engaged in rapid negotiations to finalize the FTA by the end of the month, the report suggests that many of India’s exports to the UK already enjoy low or zero tariffs.
The Global Trade Research Initiative (GTRI) has emphasized that although sectors such as textiles, apparel, footwear, and agricultural products could benefit from reduced tariffs, the substantial growth of Indian exports to the UK will ultimately rely on product quality enhancements rather than the FTA itself.
The report points out that merely signing an FTA may not result in a significant increase in India’s labor-intensive goods exports. For instance, India’s textiles and apparel exports to Japan did not experience significant growth under a similar FTA. Instead, they grew by only 43.1% from 2007-09 to 2019-21, while India’s global exports increased by approximately 67.9% during the same period, suggesting that natural growth factors played a significant role.
On the flip side, UK exports to India face substantial tariffs, particularly on items such as cars, Scotch whisky, and wines. The FTA could potentially lead to tariff reductions on these products, opening up new opportunities. However, India’s reluctance to reduce tariffs in certain sectors, like dairy, due to political sensitivities, underscores the necessity for selective import liberalization to enhance domestic quality.
Currently, Indian tariffs on British cars stand at 100%, while Scotch whisky and wines face tariffs as high as 150%. The average tariff on goods imported from the UK into India is 14.6%.
In sum, while the India-UK FTA holds promise in specific sectors, its overarching impact on Indian exports is contingent on various factors, including product quality improvements and the complex dynamics of international trade.
