Potential growth of 26% in bilateral trade eyed

The potential for the growth in India-U.K. trade following Brexit is Withan issue that has cropped up frequently in the debate around Britain’s decision to leave the E.U., and with the triggering of Article 50, focus has shifted to the specifics of what that could entail, including the sectors that could benefit.

Recent sector-specific analysis conducted by the Commonwealth provides an initial picture of what could ensue, estimating that bilateral trade could rise by up to 26% a year under an FTA between the two nations. While much of the growth would come from a reduction on tariffs on the Indian side (Indian tariffs are higher on average than the other way round — 14.8% versus 8.4%), it estimates that Indian exports to the U.K. could rise by as much as 12%, with sectors such as clothing, industrial and mechanical appliances such as turbo jets and transmission shafts seeing strong growth. The report also highlighted the opportunity for increasing the exports of services as well as new exports such as non-industrial diamonds, and specific mechanical devices. While the figures are likely to be on the optimistic side (envisaging a zero-tariff scenario, and the diversion of trade from regions such as the E.U.), they provide a snapshot of the beneficial impact a free trade agreement could have on stimulating a trade and investment relationship that has faltered somewhat in recent years.

“There is great potential for future growth in trade between Indian and the U.K.,” said Pratik Dattani, director of FICCI in the U.K. “This is especially as the most recent U.K. government figures show India has dropped out of the top 20 export markets for the U.K. The coming months will no doubt see a need for continued robust analysis of the impact on trade in different sectors,” he added.

“Bilateral trade research and reports, such as one by the commonwealth secretariat, offer empirical evidence and a pragmatic model for countries to understand the impact free trade can make,” said Sarosh Zaiwalla of Zaiwalla Solicitors.

‘Fresh start’

“While India h1as been negotiating a broad-based trade and investment agreement with the European Union since 2007, it has remained inconclusive… India was also unable to build and expand on its trade ties with the U.K. as it was part of the EU. But with Brexit, Britain offers a fresh start for India to engage on a whole and exciting new level on sectors which have been largely dormant due to EU regulations.”

While there are concerns about Britain’s ability to simultaneously look at ways of strengthening relations with non-EU nations, at the same time it is conducting negotiations with the E.U., Virendra Sharma, the MP for Ealing Southall who has opposed Brexit, is also optimistic about the potential for growth in sector-specific trade going forward, particularly given the uncertainty around Britain’s negotiations with the E.U. “The best option for Britain will be India.”

Britain cannot commence negotiations with India on a trade deal while it remains within the E.U., but both nations have been exploring the specifics of their trading relationship. A joint working group between the two countries set up last year will be conducting an audit on the current situation and potential future, said Dinesh Patnaik, Deputy High Commissioner of India to the U.K.. The audit’s terms of reference are currently being established, and is set to commence shortly. “We are looking at where the opportunities lie.”