IAS Gyan

Daily News Analysis

India-U.K economic relations  

13th January, 2022 International News


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Context: UK government announced the launch of free trade agreement (FTA) negotiations with India.

  • It is seen as a major move by U.K. since its exit from the European Union (EU), in support of free and fair trade in the Indo-Pacific.


Recent developments:

Recently, UK-India signed a trade and investment deal worth 1 billion pounds.


Details of the deal:

  • It was part of an Enhanced Trade Partnership (ETP).
  • ETIPaim:
  • to double the value of UK-India trade by 2030 and declare a shared intent to begin work towards a comprehensive Free Trade Agreement (FTA).
  • to address several trade barriers, including the lifting of restrictions to enable fruit producers across the UK to export apples, pears and quince to India for the first time.
  • To secure improved access for medical devices through the acceptance of “UK Certificates of Free Sale” in India.


India and UK 2030 vision is for:

  • revitalized and dynamic connections between people;
  • re-energised trade, investment and technological collaboration that improves the lives and livelihoods

of citizens;

  • enhanced defence and security cooperation that brings a more secure Indian Ocean Region and IndoPacific
  • India-UK leadership in climate, clean energy and health that acts as a global force for good.
  • Through this ambitious Roadmap, India-UK relationship will elevate to a Comprehensive Strategic Partnership (CSP).


Free Trade Agreement cooperation will–

  • resolve market access issues, boost exports and strengthen trade partnership across a comprehensive range of areas.
  • remove trade barriers through balanced and beneficial market access package including agriculture, health, education, legal services, marine, and social security
  • help to share experience on regulatory reform, tax administration, and trade facilitation and standards through a new UK-India Ease of Doing Business MoU
  • institutionalize cooperation between relevant regulators to facilitate exports and avoid trade disruptions due to non-compliance with standards by producers and exporters.
  • Increase exchanges and cooperation in the services sector.
  • Step up bilateral Small & Medium Enterprises (SME) trade and collaborations, particularly technology sharing and financing of businesses.
  • Identify infrastructure projects in India, particularly green transition projects, that utilise UK Export Finance support in the form of long term competitive financing of up to £4bn, including in Indian Rupees.


Background of India-U.K. economic relations

  • Guiding principle: The economic and commerce matters of India and U.K. are guided by thr India-UK Joint Economic & Trade Committee, Economic and Financial Dialogue and India-UK Financial Partnership.
  • Existing trade balance: Merchandise trade between the two countries was US$15.45 billion in 2019-20 with the trade balance in favour of India.
  • FDI inflow:
    • India became the second-largest source of FDI according to the Department for International Trade inward investment statistics for 2019-2020.
    • UK is the 6th largest inward investor in India with a cumulative equity investment of US $28.39 billion, accounting for around 6% of all foreign direct investment into India.
  • Trade basket:

The main products of export from India to the UK include:

  • Articles of apparel & Clothing
  • Accessories
  • Power Generating Machinery & Equipment
  • Petroleum and related products
  • Manufactured articles
  • Textile Yarn
  • Footwear
  • Medicinal and Pharmaceutical
  • Manufactures of metal
  • Road Vehicles
  • Transport Equipment

 The main products of import from UK to India include:

  • Power Generating Machinery & Equipment
  • Non-Ferrous Metals, Ferrous ores & Metal scrap
  • General Industrial Machinery and Equipment & Machines
  • Beverages
  • Electrical Machinery and Appliances
  • Professional, Scientific and controlling instruments and appliances
  • Chemical materials & products