India and the UK are intent on sticking to a Diwali deadline for finalising a comprehensive free trade agreement (FTA) amid the ongoing political developments in Britain, people familiar with the matter said on Thursday.
Despite some questions raised by the leadership race in Britain’s ruling Conservative Party, the people made it clear both sides aim to have a deal stitched up and ready for signing by the leadership of the two countries by the last week of October. The UK is expected to have a new prime minister next month, giving enough time for the deal to be cleared on the British side.
“The two partners are targeting to conclude negotiations by the end of August or early September. After approvals of the respective governments, the agreement on most of tariff lines will be ready to be signed,” an Indian official said, declining to be named.
“Both the UK and India have been clear that we are working towards a comprehensive free trade agreement – neither nation is considering an interim agreement,” a person familiar with the negotiations said on condition of anonymity.
India’s commerce ministry did not respond to a query on the matter.
A spokesperson for the British high commission said: “We are making good progress toward our shared target to conclude the majority of talks on a comprehensive deal by Diwali. We remain clear that we won’t sacrifice quality for speed and will only sign a deal which delivers for the UK.”
An FTA with India “offers the opportunity to deepen our already strong relationship, which was worth £24.3 billion in 2021”, the spokesperson said.
The Indian official cited above said: “The political developments in the UK are unlikely to derail the talks.” On July 21, commerce secretary BVR Subrahmanyam said that irrespective of the party in power in the UK, the “logic of an FTA with India is irreversible”.
Both Rishi Sunak and Liz Truss, the two Conservative Party leaders in the final race to replace Prime Minister Boris Johnson, are seen as supportive of the FTA and enhanced trade ties with India.
On the Indian side, the focus has been on ensuring a better deal for the mobility of professionals and students, and boosting exports in labour-intensive sectors such as leather, textiles, jewellery, processed agricultural products, marine products, pharmaceuticals and healthcare.
One of the priorities for the British side has been to slash significant barriers UK businesses face in exporting to India. Greater access to India’s market, especially as India’s middle class grows to a quarter of a billion consumers, will be seen as a major boost for UK firms. The UK is also looking at tariff cuts for whisky and cars and greater access for digital and legal services.
“We are working hard to continue the pace of negotiations, having begun to see a landing zone for a comprehensive FTA that respects the sensitivities and domestic processes of both sides,” the person cited above said.
Both countries had come to the negotiating table with readiness to work pragmatically on a “realistic deal”, the people said.
However, the people didn’t rule out the slim possibility of the two sides having to go in for a two-stage deal in the event of some items requiring larger political consensus. While there is agreement on a majority of tariff lines, a few items may require such political consensus, they said.
India and the UK concluded the fifth round of talks for the FTA on July 29. Experts from both sides held detailed draft treaty text discussions in 85 sessions covering 15 policy areas. Officials will continue working throughout the summer towards the target of concluding the majority of talks on a comprehensive FTA by the end of October,” a joint statement said.
Following Britain’s exit from the European Union (EU), the UK has been keen on quickly concluding trade deals with major economies such as India. The UK has concluded deals with 69 countries and one with the EU. India has speedily finalised trade deals this year with Australia and the United Arab Emirates and is in talks with the EU, Canada and other nations.
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