India and the UK agreed on Friday to intensify their economic ties by removing additional barriers and working on an enhanced trade partnership that could possibly pave the way for a free trade agreement.
During a virtual meeting of the Joint Economic and Trade Committee (JETCO), India’s commerce minister Piyush Goyal and UK’s international trade secretary Liz Truss also agreed to work on maximizing the potential of the digital economies of the two countries, including on data regulation and interoperability.
International Trade Secretary Liz Truss said: “My first JETCO with India has been an opportunity to take stock of progress made so far between our countries and look at barriers preventing our trading relationship from reaching its full potential. India is an incredibly important partner for the UK. As one of the world’s largest economies and democracies, it is a powerhouse that will play a major role in shaping the 21st Century. Today we agreed to look in detail at a framework for a deeper relationship. At this stage, we want to keep all options on the table, including the possibility of a free trade agreement at some point in the future.”
The meeting was held against the backdrop of India’s efforts to boost economic activity to overcome the impact of the Covid-19 crisis and to forge cooperation aimed at shaping new supply chains and the economic order in the post-pandemic era.
The UK, which is in the process of exiting the European Union (EU), is keen to bolster economic ties with India, which is also being wooed by the 27 remaining countries in the bloc. India-UK trade was worth £24 billion last year, and India is now the second-largest investor in the British economy.
Truss and Goyal’s agreement
Truss and Goyal agreed to explore opportunities for expanding and deepening the trade relationship. “This will include an enhanced trade partnership as the first step on a wider roadmap for a deeper trade partnership, and subject to progress could lead to a future free trade agreement,” a statement from the British high commission said.
“Work has been underway to reduce barriers to trade since both countries completed a Joint Trade Review in 2018. The UK’s new Global Tariff (UKGT) schedule serves as a ‘building block’ towards an increasingly open trade partnership. Assuming all tariffs are levied, the UKGT could boost trade flows by reducing tariffs on Indian exports by up to £40m per year. Alongside this, UK companies have secured recognition and registration of polyhalite, a multi-nutrient fertilizer mined in the UK, which will enable UK exports and help Indian farmers to increase crop yields while supporting a cleaner, greener, and sustainable environment. Increasing investment in each other’s markets is more important than ever as both economies seek to recover from the impact of Covid-19,” British High Commission said in a statement.
An Indian official familiar with developments, who declined to be named, said: “The UK is a very important ally of India and at this point in time, cooperation from the UK will be of immense importance. The UK has been supporting India’s cause at multilateral forums and we will further strengthen this relationship, which will span through trade, investment, and cultural and strategic ties.”
Trade between India and UK touched $15.5 billion with a $2 billion trade surplus in favor of India. India is now the second-largest investor in the UK economy. There are 842 Indian companies in the UK, employing more than 110,000 people, which together raised almost £41 billion in revenue last financial year. The combined revenue of Indian companies in the UK has grown by 87% in the last five years, the statement said.
Britain’s trade minister statement
Britain’s international trade minister Ranil Jayawardena, who also joined the meeting, raised the issue of removing barriers for businesses in a range of sectors, including food and drink, healthcare, life sciences, IT, data, chemicals, and services.
The British side noted that the UK’s new Global Tariff, which comes into force on January 1 next year, will benefit Indian exporters by reducing tariffs on their goods by up to £40 million a year, assuming all duties are levied.
It was also pointed out that UK companies have secured registration for polyhalite, a multi-nutrient fertilizer mined in Britain that could help Indian farmers to increase yields while supporting a cleaner and sustainable environment.
“Increasing investment in each other’s markets is more important than ever as both economies seek to recover from the impact of Covid-19,” the British high commission’s statement said.
The statement quoted Truss as saying that the meeting was an opportunity to “look at barriers preventing our trading relationship from reaching its full potential”.
She described India as an “incredibly important partner” and said: “Today we agreed to look in detail at a framework for a deeper relationship. At this stage, we want to keep all options on the table, including the possibility of a free trade agreement at some point in the future.”
Jayawardena also led a business plenary, organized by the UK India Business Council (UKIBC), where the ministers spoke with businesses from both sides about the shared ambition to deepen the economic partnership.
“The United Kingdom and India share a strong and enduring bond, strengthened by a modern trading relationship. It’s clear from today that there are huge opportunities to deepen our relationship with India. We want to knock down existing trade barriers, create more good jobs and encourage innovation between two of the greatest democracies in the world. I’m pleased to see our shared ambition in the spotlight today as we boost our trading relationship,” Jayawardena said.
Indian and British investments support more than half-a-million jobs in each other’s economies. There are 842 Indian companies based in the UK, employing more than 110,000 people and their revenues in the last fiscal were almost £41 billion.
The UK is the second-fastest-growing G20 investor in India over the past 10 years, investing more than £22 billion and helping create more than 422,000 jobs. India is currently the second-biggest investor in the UK, with 120 new projects and more than 5,000 new jobs in 2019-20.
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