Business

IIE DIGITAL DESK : India and the United Kingdom are on the verge of finalizing a landmark Free Trade Agreement (FTA), with the official text anticipated to be ready within the next three months. A senior Indian government official confirmed that the agreement, which has been under negotiation for over three years, is expected to be signed after this period and will take over a year to implement.

A significant aspect of the deal is India's decision not to impose a Minimum Import Price (MIP) on UK whisky imports. This move aims to enhance the competitiveness of British Scotch whisky in the Indian market, which currently leads the global whisky consumption. The agreement outlines a phased reduction of tariffs on Scotch whisky, decreasing from the current 150% to 75% initially, with plans to further reduce them to 40% over the next decade.

The Confederation of Indian Alcoholic Beverage Companies (CIABC) had previously advocated for a gradual reduction in import duties to protect domestic manufacturers. They proposed a phased approach, suggesting duties be reduced to 100% immediately, 75% after five years, and 50% after ten years. Additionally, they recommended implementing a Minimum Assessable Value (MAV) to prevent dumping of low-priced imports. 

Beyond the whisky industry, the FTA encompasses various sectors. India has agreed to provide import quotas to Britain for both combustion engine and electric vehicles, with tariffs to be reduced gradually based on engine capacity and vehicle prices, excluding cheaper models. The agreement also addresses India's request to be exempt from the UK's proposed Carbon Border Adjustment Mechanism (CBAM), which imposes higher taxes on imports from countries with less stringent climate policies. India has reserved the right to retaliate if the CBAM is enacted. 

The FTA is projected to significantly boost bilateral trade, aiming to double it by 2030. Currently, trade between the two nations stands at approximately $21.34 billion. The agreement is expected to contribute £4.8 billion to the UK economy by 2040, with substantial benefits anticipated for sectors like spirits and automotive.  

While the deal marks a significant step in strengthening economic ties between India and the UK, it also highlights the complexities of balancing domestic industry interests with international trade commitments. As the final text is prepared for signing, stakeholders from various sectors will be closely monitoring the developments to assess the potential impacts on their respective industries.