Sunday, 23 Mar, 2025
Photo courtesy: Pixabay
Lowering tariffs could deepen India’s role in global value chains, which drive 70% of trade. With a mere 2% share of global exports, New Delhi must adapt to evolving dynamics to strengthen competitiveness and expand its influence in the global marketplace.
India is open to lowering tariffs under a free trade agreement with the UK and is advancing talks on a social security pact, Commerce Minister Piyush Goyal said February 24. Speaking alongside UK Business and Trade Secretary Jonathan Reynolds, the minister reaffirmed India’s goal of more than doubling bilateral trade over the next decade while advocating for a more flexible visa regime to boost business ties.
Talks are progressing on three fronts—an FTA (free trade agreement), a Bilateral Investment Treaty, and the Double Contribution Convention Agreement on social security. Goyal clarified that immigration is not part of the discussions, though business visas remain on the agenda. Negotiations resumed after Prime Minister Narendra Modi and UK counterpart Keir Starmer met at the G-20 summit last year.
More significantly, the announcement comes amid rising global trade tensions, including tariff threats from US President Donald Trump, which could push advanced economies like the UK to accelerate trade negotiations with India. Plus, experts see this as an opportunity for India to strengthen trade ties with advanced economies like the UK and the EU, capitalising on its rapid economic growth.
A free trade agreement is a pact between two or more countries to eliminate or reduce import duties on 90-95 per cent of traded goods. It also seeks to lower non-tariff barriers, streamline regulations, and facilitate service exports and bilateral investments, fostering deeper economic integration.
Bilateral trade between India and the UK rose to $21.34 billion in 2023-24 from $20.36 billion in the previous fiscal year. The UK remains a key economic partner, ranking as India’s sixth-largest investor, with cumulative FDI (foreign direct investment) inflows reaching $35.3 billion between April 2000 and September 2024.
Goyal called the potential India-UK trade deal “pathbreaking,” stating it could push bilateral merchandise trade beyond $40-60 billion over the next decade. While noting that talks are in an advanced stage, he refrained from setting a timeline, emphasising that a well-structured agreement would yield long-term benefits for both nations.
New Delhi and London UK have been in trade negotiations since 2022, seeking a deal that balances their economic priorities. With India not part of major regional trade blocs, securing agreements like this is crucial for expanding market access and global integration. However, hurdles persist—India is pushing for greater mobility for its skilled workforce, while the UK, leveraging its strong services sector, seeks lower tariffs and wider market access.
Goyal emphasised the need for a faster and more flexible business visa regime to boost trade and investment between India and the UK, clarifying that business mobility is part of FTA talks, while immigration remains off the table. As part of the agreement, both nations are expanding market access in services and creating a more investment-friendly environment.
The minister noted that many of the existing tariffs serve as a safeguard against non-market and opaque economies. However, he emphasised that both India and the UK are demonstrating greater flexibility and a willingness to lower tariffs significantly to boost business competitiveness and bilateral trade.
Analysts say lowering tariffs could help India integrate more deeply into global value chains, which account for about 70 per cent of global trade. Beyond trade, New Delhi must also focus on improving labour and environmental standards, including reducing carbon intensity. With its share of global exports still around 2 per cent, India lacks the leverage to dictate terms, making it essential to adapt to shifting global conditions to maximise its trade potential.
