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India: Expert says Modi should focus on ‘defusing situation’
Negotiations over a trade deal with India are moving in the right direction, a trade expert has said. It comes as sources told Reuters news agency last Friday (October 14) a deal would not be done by the October 24 Diwali deadline announced by then Prime Minister Boris Johnson after he met Indian Prime Minister Narendra Modi in New Delhi in April.
It was not immediately clear what was causing the delay. Previous hurdles have included a steep import duty on whiskey for sale in India and New Delhi’s demand for more visas for Indian students and businesses.
Foreign Secretary James Cleverly has said Britain wants an even stronger trading relationship with India after comments made by Home Secretary Suella Braverman about the possible impact of Indian migrants in the UK.
Supporters have defended the deal, hailing the opportunities it presents to British businesses and consumers.
Sangeeta Khorana, a professor of economics at Bournemouth University, speaking in a personal capacity, told Express.co.uk: “There has been very good momentum in talks. We do see very good progress with an ambition to complete the talks by Diwali. If there is no ambition, then how would you get a deal done?
A trade deal between the UK and India aimed to be completed by October 24 (Image: Getty)
Narendra Modi with Boris Johnson during a meeting and signing of memorandums (Image: Getty)
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“It makes a lot of sense to have an agreement between both partners on a deadline, which obviously could move a few weeks here and there. You cannot set it in stone. But given the pace of negotiations, I think we are moving in the right direction.”
She explained how India has struck few bilateral trade deals in the past. Previous negotiations on an EU-India trade deal collapsed in 2007. India’s trade deals in the past have also been shallow rather than comprehensive. So far the south Asian country has agreements with Australia and the United Arab Emirates.
The number of deals has led some to suggest India’s trade negotiators are tougher than those from other countries.
Professor Khorana said: “I would not say that the Indian trade negotiators are tough, but I would actually say that the demands that are being made, might be tough.”
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Single malt whisky matures in bourbon barrels at the Kilchoman distillery (Image: Getty)
An employee works on the door frame of a Bentley Continental automobile at the Lunaz Group Ltd. HQ (Image: Getty)
India is also negotiating a deal with Canada as well as the UK. Negotiations for a deal with the EU have also restarted with India, one of the world’s biggest and fastest-growing economies. The country is set to become the world’s third biggest economy by 2050 with a bigger population than the US and EU combined.
Professor Khorana said: “I think there’s a lot of momentum now on the Indian side to do deals. Probably, because the benefits of bilateral trade deals have been showcased by the benefits such agreements bring and, most importantly, India realises a trade deal is a potential vehicle for India to be part of the Global Value Chain revolution.
“India has realised it missed that trick and, in my opinion, the negotiation of trade deals is a mechanism to increase exports for India, [which] has demonstrated its capability to increase exports, because last year India overperformed [against] the target set.
“There are strategic interests in doing a trade deal because we all understand the sensitivities of the Indo-Pacific region and the ambition India has to play an important role in the region, which at times gets overshadowed because of the economic dominance of China.”
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Some of the obstacles UK-India negotiators have faced have been in the agriculture sector, financial services, legal services and whiskey tariffs. Data localisation has also proved to be a sticking point.
Professor Khorana explained the hurdles met during the negotiations were not unexpected.
Wrangling over immigration was also expected, according to Professor Khorana, who said: “If you look back to the start of the trade negotiations, it was made clear by India it would not be a red line. They said they were open to negotiating a trade deal with the UK and there was no specific red line. [Mobility] has been blown out of proportion.”
Professor Khorana added: “Negotiations are hugely complex. It is the complexity of these negotiations which make it very difficult to attribute it to one factor that leads to the success or failure of a trade negotiation. You have to look at it from a multi-dimensional perspective. There are very many actors and very many different issues that keep changing.
Shoppers browse household goods at a store in Mumbai (Image: Getty)
“We cannot view it from a single dimension, which unfortunately is the case at the moment.”
Professor Khorana described the potential deal between Britain and India as ambitious.
She said: “It is a hugely ambitious deal. The ambition is embedded in the fact both partners have an economic interest and a strategic interest. In this case I can see both countries being able to benefit from the synergy of the trade deal.”
Marco Forgione, Director of the Institute of Export and International Trade (IOE&IT), told Express.co.uk: “[The deal] is hugely significant for the UK because the EU doesn’t have a trade agreement with India, though they are in the process of trying to get one done, so the UK is really showing the benefits of its new status in getting that agreement penned and inked.”
The ambition in the deal is also evident in the partners’ aim to double the value of current trade volumes from £24billion by 2030 and boost Foreign Direct Investment. There is an expectation there will be movement over tariffs on cars and a change in approach to Scottish whiskey imports. The deal could also lead to UK Master’s degrees gaining recognition in India.
He explained how Scottish whiskey alone could benefit within five years from £1billion worth in additional trade with India.
Mr Forgione said: “It is a major, significant opportunity. The opening up of the car sector – there is a massive increase in car use in India and the UK brands are hugely respected and admired there. If you look at the potential for the professional services sector in India, that’s a booming marketplace.”
He also hailed India’s growing middle class, which by some measures is increasing at an annual rate of 10 percent.
A DIT spokesperson said: “India is projected to be the world’s third largest economy by 2050. We already have a strong trading relationship worth over £24billion last year, and any improvements could be game changing for UK businesses. A bold, new deal would put UK firms at the front of the queue to supply India’s growing middle class, which is expected to increase to a quarter of a billion consumers by 2050.”
Professor Khorana said: “I really salute the ambition behind [the deal]. These economies are the fifth and sixth largest in the world so a trade deal between two economies of this magnitude would benefit not only businesses but also consumers in the form of lower prices and more choices.”
On whether there will be a deal by Diwali, Professor Khorana said: “Diwali was the goal. It is important to get the deal done. It does not make sense to sacrifice quality [to meet the deadline]. It’s the end game that really matters rather than saying we want to complete the deal by a certain deadline. I hope the deal that is done achieves the objectives… to reduce barriers and increase trade.”
The Government insists it will not sacrifice quality for speed and will only sign a deal which is in the best interests of the British people and economy. It says the deal has the potential to boost the UK economy by more than £3billion by 2035 in an agreement which slashes barriers to doing business and trading with India’s £2trillion economy and market of 1.4 billion consumers.
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