The UK-India Free Trade Agreement: The Journey, Challenges, and What’s at Stake.

As of today, the UK and India are inching closer to finalizing a landmark Free Trade Agreement (FTA), a development that has been years in the making. Initially championed by Boris Johnson, the FTA has faced delays owing to a mix of political and logistical factors. Now, with negotiations at a critical juncture, concerns are rising over potential risks from changes in political leadership which could influence the final shape—or even the existence—of the agreement.

Background: An Initiative Set in Motion by Boris Johnson

When then-Prime Minister Boris Johnson announced his ambition for an FTA with India, the vision was bold. The idea was to forge a "new era" of UK-India relations that could strengthen ties and foster growth through enhanced trade and investment opportunities. India is now the world’s fifth-largest economy, and closer alignment with it would undoubtedly boost the UK’s post-Brexit economic agenda. As Johnson laid out at the time, a deal with India represented not only a trade opportunity but also a geopolitical shift, reducing dependency on Europe and broadening the UK’s influence within the Commonwealth and beyond.

Yet, political realities have introduced roadblocks. India’s and the U. K’s general elections in 2024 have created an environment where domestic priorities frequently clash with international agreements. These electoral cycles have led to delays in negotiations, with both governments focusing on consolidating support among their respective electorates. As the FTA faces new risks, including concerns about Labour leader Keir Starmer’s potentially differing priorities, the path to finalization remains fraught with uncertainty.

Current Status of Negotiations and Outstanding Issues

Negotiators have made substantial progress, reaching preliminary agreements on several aspects of the FTA. However, critical sticking points remain:

1. Tariff Reductions on Key Goods: India has long been protective of its agriculture and dairy sectors, resisting UK proposals for significant tariff reductions. The UK, on the other hand, is advocating for reduced tariffs on British whiskey, automobiles, and financial services. Both parties are aware of the high stakes but have yet to find common ground.
2. Mobility of Professionals and Visas: The movement of skilled workers has become a key issue. India is pressing for increased visa quotas for professionals in sectors like IT, engineering, and healthcare, aiming to establish clearer pathways for Indian talent into the UK. The UK is open to such provisions but remains cautious due to domestic concerns about immigration control.
3. Data and Intellectual Property Rights (IPR): India’s growing technology sector has led to heightened concerns over data privacy and intellectual property rights. UK firms are pushing for stronger IPR protections to safeguard investments and proprietary technology. These concerns are expected to be met when India’s Digital Personal Data Protection Act 2023, comes into force, hopefully this year.
4. Environmental Standards and Labour Regulations: As in many contemporary trade deals, environmental and labour standards have become important discussion points. The UK seeks assurances that its goods and services will not be undercut by labour or environmental policies in India. India, for its part, views these as potentially stifling its industrial competitiveness and has resisted binding commitments on these fronts.

Despite these challenges, both governments have expressed optimism about reaching an accord. The most recent rounds of talks reportedly focused on bridging gaps on mobility and tariff structures, signalling that these issues are likely within reach, given the right political backing.

The Differences the FTA Will Make

The impact of a UK-India FTA would be profound, reshaping the economic landscape for both nations:

• Boosting Bilateral Trade: Estimates suggest that an FTA could increase UK-India trade from ￡29 billion in 2022 to over ￡50 billion within a decade. This would be a massive leap, offering exporters on both sides better access to one another’s markets.
• Diversifying UK’s Trade Post-Brexit: For the UK, the FTA with India would represent a crucial step in its “Global Britain” strategy, reducing dependence on the EU and positioning the UK as a key trading partner with one of the world’s fastest-growing economies.
• Enhanced Sectoral Opportunities: British sectors like Legal and Financial services, automotive, and healthcare would benefit from reduced tariffs and streamlined business processes. India’s tech and services industries would also gain, especially if visa provisions support freer movement of skilled workers.
• Strategic Geopolitical Alliances: Beyond economics, this FTA holds significant geopolitical weight, enhancing the UK’s footprint in the Indo-Pacific and aligning with India’s own “Act East” policy. In a time of shifting global alliances, both nations stand to gain from a stronger strategic partnership.

Expected Signature Date and Political Risks

Although the UK and Indian governments had initially aimed for a deal in 2023, this timeline has slipped due to the complexities of ongoing negotiations and the electoral landscapes in both countries. There is now a cautious expectation that the FTA could be signed late this year. However, if delayed further, there is always a risk that the deal could be left in limbo.

This brings us to the current political landscape in the UK, with Keir Starmer’s Labour Party now forming the government. While Labour has broadly supported the idea of expanding trade relations with India, there is credible concern that the government is so mired in its self-contradictory approach to domestic economic issues that it may simply fail to give the FTA the attention it deserves. There are very credible voices in India who have questioned whether Starmer’s administration even has the ambition and confidence in the U.K to view it as a global trading nation.

Conclusion: A Window of Opportunity and What Lies Ahead

For both the UK and India, the FTA represents a rare alignment of economic opportunity and geopolitical strategy. As an international corporate lawyer and observer of global markets, I believe this deal has very significant benefits for businesses at both ends of the Anglo-Indian corridor. It offers unparalleled growth potential for companies willing to navigate the complexities of a new regulatory environment. SEVEN LEGAL and I are well positioned to assist those businesses which want to seize that opportunity.

?However, time is of the essence. If political ineptness in the U.K. overshadows this window of opportunity, the UK and India risk losing out on a deal that could redefine their economic and strategic partnership for decades to come.

Only time will tell whether the UK-India FTA will emerge as a triumph of post-Brexit diplomacy.