India and the UK are edging closer to a free trade deal that both sides are hoping to wrap up very soon. But there are still tough hurdles to overcome and New Delhi’s call for easing visa restrictions and greater access to the labour market aren’t even on the table.
India has agreed to slash duties on Scotch whisky sharply from 150 per cent to 100 per cent and make similar duty cuts on imports of British automobiles and automotive components, The Times, London has reported.
In exchange, India is requesting that Indians who work in Britain for short stretches -- such as tech workers there on short-term projects – should be exempted from social security payments. Currently, Indians there for short stays have to make social security payments that they lose if they’re not there for a minimum number of years.
A trickier issue is that India also wants legal assurances about rules regarding Indian students in the UK. Under tough new rules introduced by Britain’s hardline Home Secretary Suella Braverman, students won’t be allowed to have family members accompanying them during their studies. Braverman is also trying to shorten the time students are allowed to stay on in Britain after they complete their courses.
India and the UK have held 13 rounds of trade talks and UK trade secretary Kemi Badenoch was in India last week to help unravel some of knottier issues that still remain and which are inevitably left to the last in such negotiations.
Badenoch insists that easing visa restrictions and access to the labour market are not a part of the trade talks. “Actually, visas and visa liberalisation don't come within free-trade agreements. It's an immigration issue, which is dealt with by our Home Office,” Badenoch said.
India levies import duties of between 70 per cent and 100 per cent on automobile imports and proposes to bring this down to 10 per cent over a five-year period, according to The Times. India is one of the world’s most protected automobile markets globally so cutting duties would have a considerable impact on the market.
Indian automaker, Tata Motors is, of course, the biggest shareholder in the UK’s top automaker Jaguar LandRover. Tesla’s been looking at entering the Indian market but has abandoned its plans for the time being due to the protective tariffs. One proposal is that only a limited number of cars should be allowed into the country initially.
Scotch whisky has long been the trickiest issue between the UK and India and was also a sticking point in India-EU negotiations when Britain was part of the transnational organisation. India is now the second-largest Scotch whisky consumer globally and overtook France according to the latest figures released a few months ago.
But India’s politically powerful liquor barons have always been an enormously strong force blocking the lowering of duties on Scotch whisky. The question remains whether the government will be able to convince them to drop their objections to bringing down the tariffs. Scotch whisky manufacturers argue their sales are always limited to an upper segment of the market and won’t threaten local producers.
India’s on a strong wicket on the issue of exempting social security payments for short-term workers. France, Australia and Canada have all granted such exemptions. France changed its rules about such payments more than 20 years ago.
One unusual issue the British government may face if it plans to ease the regulations on social security payments is that such a move would benefit India’s software services industry. That would obviously include Infosys in which British Prime Minister Rishi Sunak’s wife Akshata Murthy holds a considerable stake.
Sunak has already faced accusations of making moves that favour Infosys. The Guardian reported that MP Darren Johns, the Labour Party chairperson of the business and trade select committee, wants Sunak to recuse himself from the trade negotiations.
Officials on both sides say that with 19 of 26 chapters of the treaty completed, the talks have reached the most intense and politically delicate stage with key concessions on goods, services and labour mobility being negotiated. India wants a “balanced” agreement.
Stakes are high for both sides. India’s the second-largest foreign investor in the UK. Both sides are hopeful that the deal will help meet the goal of doubling bilateral trade by 2030. Last year UK exports to India jumped by 44 per cent to 14.7 billion POUNDS STERLING while imports from India also increased by 28 per cent to £21.6 billion POUNDS STERLING.
“We’re now in the final stages (of negotiations). I can't give a deadline. Anything can happen… but I’m very optimistic” about striking a "mutually beneficial" deal, Badenoch said. The two countries hope to wrap up the trade talks before next year’s general election.