India and the UK are set to launch free trade agreement (FTA) negotiations in November 2021, with the aim of an interim agreement in early 2022. In preparation for this, the UK Department for International Trade (DIT) and Indian Ministry of Commerce and Industry (MoCI) recently undertook a business consultation, with wide input across all sectors. The Institute of Development Studies (IDS) collaborated with the UK India Business Council (UKIBC) to engage with businesses and learn from pre-FTA consultation roundtables conducted in July and August 2021.
Understanding the needs of businesses and government
We identified three themes that were highlighted across the wider engagements and business consultations: mutual understanding, partnership, and participation.
Firstly, business-to-business and business-to-government relations have been facilitated over the years by extensive policy advocacy between the countries. This mutual understanding between businesses has contributed to a deeper understanding of opportunities and sentiments on both sides. Interestingly, UK businesses recognise India’s invocation of the ‘self-reliance’ narrative towards strengthening its position in global supply chains, but India’s enthusiasm in forging trade and investment relations has received greater weight – an aspect that Indian businesses would be keen to build on and uphold. And while the former led to some caution for UK companies in bidding for tenders, there are also reports of firms establishing local presence in India and focusing on co-creation for manufacturing, especially within the technology sectors. However, such longer-term, local content requirements are an entry barrier for less resourced businesses and those without established local networks, and that could prompt an interim agreement between the two countries.
Second, businesses seek, and stress the importance of, increased partnership programmes. The UK and India have been involved in several such partnership programmes over the past several years, especially in the health and technology sectors. These partnership programmes and agreements offer footholds for companies to access new markets, create employment opportunities, and offer pathways for innovation and strengthened collaboration. The successes of these partnerships have piqued business interests and have increased demand for such programmes on a larger scale and across more sectors. In addition to the rewards and benefits created from collaborative programmes, they can build stronger relationships between the two governments and emphasise their commitment to win-win agreements and to their joint development.
Although these partnership programmes may be resource intensive for the participating governments, they are key pathways to tackle market access barriers from business perspectives, and also promise potential for development impact. The importance of partnerships was also underlined on the regulations side, especially for excise taxes and new areas, such as digital technologies and data. A 2020 UKIBC report found that ‘finding a suitable partner’ is considered a key success criterion by UK businesses when doing business in India.
Third, a participatory approach was emphasised to achieve progress. Businesses highlighted the need for regular two-sided conversation, where both parties are clear of the positions they hold, what they can offer each other, and what they want from an FTA. Different sectors in the UK have varying concerns about market access in India, and despite the seemingly meaty asks from sectors when it comes to an FTA, constant communication between business sectors and governments can help focus on creating a strong foundation for FTA negotiations. By identifying overlapping points of interest and concern as well as emerging issues, regularly involving different sectors in the decision-making process on both sides can enable well designed early harvest agreements that can help move the FTA along, while providing positive examples to solidify the UK’s role as a trusted partner of India. A participatory approach alongside partnership programmes will bode well for small and medium-sized enterprises (SMEs), specifically to receive the support and advocacy needed for them to tackle market barriers due to their limited resources. Additionally, supporting businesses of all sizes with a participatory approach and focused advocacy will expand opportunities for long-term growth and job creation between the two countries, realising the aim for development impact.
Moving forward in the FTA negotiations
There is general optimism for possibilities from the UK-India FTA, but negotiations may not be straightforward. The pathway to a UK-India FTA will require that negotiations place greater attention to the above discussed triad of mutual understanding, partnership, and participation, through focused advocacy implemented in a gradual and phased manner, prioritising development goals, and achieving successes along the way.
Amrita Saha is an IDS Research Fellow working with the Rural Futures and the Business, Markets and State clusters at IDS.
Mary Abounabhan is a researcher working on trade and development at IDS.
Kealan Finnegan works with the UK India Business Council and is responsible for Policy and Advocacy.
This blog is part of our blog series ‘Voice on Inclusive Trade’. Other blogs in this series:
- Can inclusive trade policy tackle multiple global challenges?
- The future of UK-India trade and development – part one
- The future of UK-India trade and development – part two
- Trade, human rights and EU-India negotiations
- Can the RCEP strengthen global cooperation for trade, investment and sustainable development?
- Two developments for South-South trade and investments post Covid-19
- A new WTO chief creates opportunity to realise a globally inclusive trading system
- Amid shifting global trade dependencies, can the South provide greater certainty?
- Designing for Impact: South-South Trade and Investment
- Reflections on South-South co-operation on trade and investment ahead of BAPA40
For more on inclusive trade and development, Watch our Inclusive Trade event series.