Context:

Two democracies, two elections and two path-breaking results. In June this year, Prime Minister Narendra Modi became the second leader in Indian history to win a third consecutive term and in July, the Labour Party under Sir Keir Starmer achieved a landslide victory in the United Kingdom, marking a new chapter of the U.K.-India partnership.

Positive Signals in the U.K.-India Engagement

Labour Party's Pledge

The Labour Party has pledged to pursue a “new strategic partnership” with India. This includes a swift conclusion of the U.K.-India Free Trade Agreement (FTA) and deeper cooperation on various fronts such as security, technology, climate change, and education. The visit of the U.K.’s Secretary of State for Foreign, Commonwealth, and Development Affairs, David Lammy, to India within a month of taking office is a positive sign of engagement.

Current Bilateral Trade and Investments

The ‘2030 Roadmap’ has been effective, with bilateral trade standing at £39 billion in 2023. Both countries are significantly investing in each other’s economies, with around eight lakh people employed across both nations. However, there is a call for both governments to agree on a new Roadmap to 2047 to unlock the full benefits of this partnership.

India-UK Free Trade Agreement (FTA)

Current Status and Challenges

One of the immediate tasks for both governments is to advance the India-UK Free Trade Agreement (FTA) negotiations. Despite completing 14 out of 26 chapters, several contentious issues remain. These include the reduction of Indian tariffs on British whiskies and cars, and India’s demand for lower tariffs on textiles, which face high competition from Bangladeshi products benefiting from Least Developed Country (LDC) status.

Visa Regime and Investment Opportunities

India’s desire for a more liberalised British visa regime for its professionals is expected to encounter less resistance under the Labour government, which does not emphasise anti-immigration rhetoric. The investment landscape is promising, with at least 850 Indian companies operating in Britain and significant British investments in critical sectors like semiconductors and green energy.

Strategic Benefits and Economic Impact

The FTA aims to boost bilateral trade and support India’s goal of becoming a $5 trillion economy while assisting Britain’s economy, which had a trade deficit of £7.3 billion with India in 2023. With the Labour government providing a stable majority, there is a greater chance of concluding the FTA successfully, avoiding the complexities of coalition politics.

India’s Growing Global Influence

India’s Emerging Position

India’s global position is increasingly prominent. Its successful G-20 Presidency in 2023, remarkable moon landing, leadership in digital public infrastructure, and projected status as the world’s third-largest economy highlight its growing influence. The U.K. India Business Council aims to help U.K. companies understand and capitalize on the Indian opportunity, viewing India not just as a market but as a strategic partner.

Economic and Strategic Opportunities

India’s strong return on investment (ROI) per dollar of R&D spend, exemplified by the achievements of the Indian Space Research Organisation, underscores its value as a partner. Indian firms are keen to collaborate with U.K. companies, and there are opportunities to enhance U.K. clinical trials in India, share healthcare research, and support knowledge transfer.

Key Areas of Alignment

Collaborative Efforts and Investments

The U.K. is investing in innovative sustainability technology, with British banks providing significant climate financing to India. U.K. universities are collaborating with Indian industry to develop talent and offer world-class higher education through innovative Transnational Education routes.

Science and Innovation

The landmark G2G agreement to collaborate on science and innovation sets a positive precedent. The U.K. and India are natural partners in defence and security, with the U.K.’s sophisticated defence industry supporting India’s focus on indigenisation and technology supply chains.

Mobility and Student Visas

Mobility is another area of alignment, with about 3,50,000 visas issued to Indian nationals for work, education, or as dependents in the past year. Further championing this ‘living bridge’ will enhance mutual trust and confidence.

Security and Defence Cooperation

Indo-Pacific Focus and Strategic Interests

The Indo-Pacific region is crucial for the U.K.’s commercial and security interests, as outlined in its Integrated Review Refresh strategy. This approach emphasizes cooperation with nations like India to ensure regional stability through maritime and other means. Both countries’ memberships in the QUAD and AUKUS align with goals to counter Beijing’s influence, though Labour’s mixed signals have raised skepticism about Britain’s future commitment.

Defence Deals and Cybersecurity

Prospects for defence collaboration are strong, particularly as India seeks to diversify its defence suppliers. Key deals, including the co-production of VSHORAD missiles and fighter jet engines, are progressing, supported by the 2+2 mechanism and Defence Minister Rajnath Singh’s visit to London. The Electric Propulsion Capability Partnership aims to enhance Indian naval vessels with electric propulsion. Additionally, cybersecurity and emerging technologies, such as Artificial Intelligence (AI), are areas of ongoing cooperation.

Labour Government’s Potential Impact

The Labour government’s approach is expected to address past criticisms of India’s Kashmir policy and be more sensitive to India’s security concerns. However, challenges may arise from minority MPs who continue to highlight contentious issues.

Unlocking Full Potential

Business Environment and Policy Reforms

To deepen the U.K.-India economic partnership, further business environment reforms in India are needed. British companies seek policies that facilitate integration into supply chains, a fair taxation regime, protection for Intellectual Property (IP), and optimizations in ease of doing business.

Future Outlook

The potential for a deeper U.K.-India economic partnership is vast, requiring concerted efforts from both nations. The focus will be on improving bilateral relations to benefit global economic and social development.

Conclusion

India is positioned as a key player in the global economic landscape, and the U.K.-India partnership represents a significant opportunity. As Mr. Modi stated, “The more your friendship deepens with India, the more prosperity accrues to both.” The two countries are at the beginning of a new era of collaboration, with the potential for transformative impacts on both economies.

Source: The Hindu