LONDON: A free trade agreement (FTA) between India and the UK will increase bilateral trade by 26 pct per annum, according to a new Commonwealth report.
The 'Brexit: Opportunities for India' briefing paper released this week will come as a further boost for the UK government's hopes of striking closer trade ties with India as it exits the European Union (EU).
Itconcludes that Britain's exports to India will increase by 33 pct annually following a new deal.
"If India and the UK decide to enter an FTA and bring down their tariffs to zero, it is likely to have a greater impact on India than the UK. India's imports from the UK are estimated to increase from USD 5.2 billion to USD 7.8 billion, i.E. Almost 50 pct rise per annum if there was an India- UK FTA post Brexit," the Commonwealth Secretariat report notes.
"A zero tariff regime between India and the UK would lead to some trade diversion from EU countries, when India would prefer importing from the cheaper source," it says in its forecast.
The analysis also highlights that India and the EU have been negotiating an FTA since 2007 without conclusion, which also presents an opportunity.
"The talks have continued since the Brexit referendum, however India has made it clear that these negotiations will have to be re-visited once the UK leaves the EU," it notes.
It adds: "The impending Brexit may further delay the conclusion of this India-UK FTA as India will now have to re- consider and re-negotiate the FTAs it holds with the remaining 27 countries of the EU. This provides India and the UK with an opportunity to strengthen their trade and investment relationship.
"One way to progress in this direction would be to draw up an FTA between the two countries. This proposed India-UK FTA may be easier to negotiate than the India-EU FTA, as some of the sticking points in an India-EU FTA may be easier to resolve."
India has sought improved market access for services in the EU in Mode 1 (information technology-enabled services, business process outsourcing and knowledge process outsourcing) and Mode 4 (the movement of skilled professionals such as software engineers).
India has also sought data secure status from the EU, which would enable high end business from the EU to flow into India.
The EU, on the other hand, has sought more commitments from India for opening up sectors like insurance and retail, and lowering tariffs in the automobile and wine and spirit sectors.
While the EU's concerns and interests - which have stalled the India-EU FTA since 2013 - may not be completely shared by the UK, India may still have some reservations about opening up its automobile sector to the UK, the report cautions.
The services industry has been singled as an area of potential as the quantity of bilateral trade between the UK and India in services is currently "minuscule".
"India exports many services for which there is a demand in the UK, and which the UK imports from elsewhere," the report points out.
"Although, no trade deals can be done until the UK formally leaves the EU, and much will depend on the negotiated deal between the EU and the UK, as one of the biggest developing countries in the Commonwealth, India needs to take this opportunity and initiate preparations for an FTA with the UK, to be concretised once the UK is no longer a member of the EU," it concludes.
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