The Fate of India-UK FTA Under New Labour Govt of UK

The UK voters have delivered a historic mandate in favour of Keir Starmer led Labour Party. While the newly elected Labour Government has to make investment political capital in building its relations with India across several areas, but one low-hanging agenda is signing of bilateral free trade agreement.

What we understand that a substantial part of deal is already frozen, but the two countries couldn’t move ahead with the signing because of several reasons including the general election they had to face. Now the election process is over. While in India Prime Minister Modi got re-elected for the third consecutive term, in Britain the voters ended the 14 years of Conservative Party’s rule.  

While India’s stance is likely to remain same on FTA negotiation and would like to pick the thread from where the talks were paused, the new UK government may like to review the progress made so far under Rishi Sunak’s Government and indicate its future move. Though the Labour Party promised its commitment towards open trade but averse to prioritizing insubstantial agreements which do not bring meaningful benefits to the UK.

The Labour Party government would also publish a trade strategy to spell out its trade policy priorities, including the focus markets for UK businesses to access. Promoting export of services seem to be a priority for the UK’s Labour government. It will seek to negotiate standalone sector deals, such as digital, or mutual recognition agreements, to promote services exports. India could find some complementarity here with the UK.  

The new UK government to seek a new strategic partnership with India, including a free trade agreement, as well as deepening co-operation in areas like security, education, technology, and climate change. This is a positive indication for India but its goal to reduce net migration may cause some hindrance in FTA signing.   

Labour Party alleges that under the Conservatives, the UK economy has become overly dependent on overseas workers. As a result, the net migration reached record high, reducing the incentives for business to train locally. The labour Government vows to end this practice of sector languishing endlessly on immigration shortage lists with no action to train up workers. The points-based immigration system to be reformed so that it is fair and properly managed, with appropriate restrictions on visas, and by linking immigration and skills policy. While it is too early to draw any definitive conclusion on the future of India-UK FTA negotiation, but it all depends upon how soon the new Labour Government spells out its priorities and more importantly on the promised action to reduce net immigration. For india, undoubtedly, UK is an important market for both goods and services export as well as an important source of FDI. A comprehensive FTA with UK would deliver win-win result for both the economies.

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