NEW DELHI: With European leaders agreeing on Monday to extend United Kingdom’s deadline for exiting from the European Union (EU) till January 31, a quiet diplomacy is gaining ground from all concerned on speeding up India-UK and India-EU free-trade pacts.
According to commerce ministry officials, despite past hiccups and slow pace, India is working to speed up negotiations on a free trade pact with both Britain and the EU to address the post-Brexit situation.
India’s software, textile and garment sectors are keen on a trade pact with the United Kingdom. These sectors are major foreign exchange grossers from the country, along with gems and jewellery.
The IT sector and other firms, which have invested in Britain and do business with EU from Britain, also want the UK to incorporate clauses in its Brexit deal with EU in order to safeguard the taxation and other interests.
According to top government officials, “Britain wants larger access in our financial sector and is projecting London as the first choice for Indian companies raising global finance. We have supported that to some extent with Indian PSUs launching all their masala bonds from London.” India, in its bid to pave way for a post-Brexit deal, has already agreed to allow 100 per cent foreign direct investment in insurance brokerages. Llyod’s has started a reinsurance office in Mumbai two years ago; this is eventually expected to turn into an insurance trading centre.
Britain’s Crown Prince Charles is scheduled to visit India next month and the trade deal is likely to figure in talks with him. However, diplomatic sources say that India is unlikely to be among the first lot of countries with which UK signs trade deals post-Brexit. “Some of those deals are already being signed, such as the Korea-UK FTA. The talks with India have been a bit more complex,” they said.
“What is far more important for us is the trade deal with EU,” said Prof Biswajit Dhar of JNU, “Those talks have been held up over issues on tariff and the entry for European automobiles and labour standards that they are insisting on.” India and EU have a bilateral trade of around $115 billion, of which $21 billion is accounted for Britain.
Europeans have indicated that they will not be able to move forward politically without having an understanding on opening up of the Indian automobile market. They want to sell completely built-up cars at some stage and seek relaxations in tariff on parts and car manufacturing kits. Officials said the negotiations hinge on the timelines for opening up.
“A delayed opening up can be looked at. But no opening up in the next five years can be allowed, given the precarious condition of our own automobile industry where sales have contracted by as much as a quarter,” said a commerce ministry official.
Other sticking points include India’s demands for freer movement of professionals and EU’s demand that duties on wines and liquors be progressively reduced. “These can be sorted out,” said an official.