2023 G20 Summit: What to expect from Rishi Sunak’s first visit to India since becoming UK PM
The historical context of India’s trade relationship with the UK, particularly in terms of wheat and wheat flour imports, serves as an interesting backdrop to contemporary discussions on a Free Trade Agreement (FTA) between the two countries. In the early 20th century, India was a significant supplier of wheat and wheat flour to the UK, accounting for over 14 percent of the total imports. This trade dynamic reflects the colonial era when India was under British rule, and trade relationships were structured quite differently.
In the present day, as the UK seeks to engage with India on an FTA, there is a clear recognition that both countries are looking to establish meaningful and long-term trading partnerships outside of the European Union, especially post-Brexit. The negotiations for the India-UK FTA have been ongoing for a substantial period, and while there was an initial announcement of a deadline for signing the FTA by Diwali 2022, this target was not met.
Key areas of contention in the FTA negotiations have included visa rules, migration policies, trade in goods like Scotch whisky and British cars, and pharmaceuticals. These issues have proven complex and challenging to resolve, which has led to delays in finalizing the agreement.
As Chancellor Rishi Sunak’s visit to India for the G20 Summit approaches and his meeting with Indian Prime Minister Narendra Modi, there is an expectation that this high-level engagement will provide renewed momentum for the FTA negotiations. While the FTA may not be signed during the G20 Summit, both sides are working toward finding common ground and addressing the sticking points. The absence of a specific timetable suggests a commitment to thorough negotiations rather than rushing into a deal.
Optimistic voices in the British government have indicated that a deal could potentially be reached by the end of 2023, although this timeline remains uncertain. Ultimately, the FTA discussions between India and the UK represent an effort to build a strong economic partnership between two significant global players, marking a departure from historical trade dynamics but reflecting the evolving realities of the post-colonial and post-Brexit era.
The issue of visas and mobility for students and professionals has been a significant topic in the India-UK Free Trade Agreement (FTA) negotiations. India, with its large population of young people, seeks to secure concessions that allow for greater mobility for its students and professionals when engaging in trade agreements, putting them on par with other countries.
However, the UK’s stance on visas and immigration has often been a contentious aspect of these negotiations. While the UK’s education sector and the Ministry of Education have shown enthusiasm for attracting a greater number of international fee-paying Indian students, the UK Home Office, which oversees migration and visas, has taken a different approach. The Home Office has traditionally aimed to control and reduce migration numbers, and various home secretaries, including the current one, have aligned with the Conservative Party’s stance on immigration.
In May 2023, the UK Home Office announced a policy change that foreign postgraduate students on non-research courses would no longer be able to bring their family members to the UK starting from January 2024. This change in policy has been seen as a restrictive measure by some.
However, there have been indications that India’s demands related to visas and mobility have evolved during the FTA negotiations. Indian High Commissioner to the UK, Vikram Doraiswami, clarified that India’s primary request is the simplification of the process for inter-company transfers. This pertains to making it easier for British companies invested in India and Indian companies with significant investments in the UK to move their employees between the two countries as part of the free trade deal.
Additionally, India has sought tax breaks for Indian professionals, especially in the IT sector, who work temporarily in the UK and may not benefit fully from pension and social security contributions. While this demand presents challenges, there are indications that the UK may be willing to consider some concessions in this regard, aligning with the post-Brexit vision of attracting talent from around the world.
In summary, the issue of visas and mobility for students and professionals remains a complex and evolving aspect of the India-UK FTA negotiations. Both sides are seeking to balance their respective priorities and interests in this area, and while challenges exist, there is a recognition of the potential benefits that a mutually beneficial trade agreement can bring to both countries.
The announcement in March 2023 by the Bar Council of India permitting overseas law firms to open offices in the country was met with enthusiasm by British law firms, as it presented an opportunity to establish a presence in major Indian cities like Mumbai, Delhi, and Bengaluru. However, despite this positive development, there remains a significant degree of confusion and ambiguity surrounding the regulations governing the operations of global law firms in India. This uncertainty suggests that there is still a long road ahead before these firms can fully engage in the Indian legal market.
The UK’s interest in securing a trade deal with a rapidly growing economy like India is driven by the recognition of India’s future growth potential. India’s economy has already surpassed that of the UK in terms of GDP, highlighting its significance on the global economic stage. An India-UK Free Trade Agreement (FTA) is seen as mutually beneficial, with the potential to expand exports and create jobs for both countries. The true trade potential between India and the UK is yet to be fully realized, and such an agreement could play a pivotal role in unlocking these opportunities.
In essence, the legal sector is just one facet of the broader economic relationship between India and the UK. While there are regulatory challenges to be addressed, the overarching objective is to foster greater economic cooperation and capitalize on the synergies between these two dynamic economies. As negotiations progress, clarity on the regulatory framework for global law firms in India will be essential to facilitate their engagement in the Indian legal market and contribute to the overall success of the trade agreement.
Rishi Sunak’s visit to India as the UK Prime Minister holds significant importance, marking his first trip to the country in this capacity. Accompanied by his wife Akshata Murty, the couple’s visit includes a planned trip to the Akshardham temple in Delhi. Beyond cultural experiences, Sunak’s visit is characterized by diplomatic engagements, including meetings with world leaders and discussions with Indian industrialists.
In recent years, Indian companies have expanded their presence in the UK across a range of sectors, including pharmaceuticals, information technology, steel, education, and entertainment. Prominent Indian business figures such as the Tata group, Hinduja brothers, Lakshmi Mittal, and Lord Swraj Paul are well-established in the UK corporate landscape. Notably, in October 2020, Indian-origin billionaire brothers Mohsin and Zubair Issa acquired a majority stake in ASDA, one of the largest supermarket chains in the UK, employing a substantial workforce. Additionally, the Serum Institute of India, headquartered in Pune, played a pivotal role in the UK’s successful COVID-19 vaccination program by partnering with the University of Oxford.
This evolving economic relationship between India and the UK underscores the transformation of India from being primarily an exporter of raw materials and food grains to becoming a significant source of foreign direct investment in the UK. In 2019, India emerged as the second-largest contributor to foreign direct investment in the UK, following the United States. This shift highlights the deepening economic ties and mutual investments between the two countries, positioning India as a key partner in the UK’s post-Brexit vision of expanding its global trade and economic partnerships.
As Sunak engages in diplomatic discussions and economic dialogues during his visit, the focus is on strengthening these ties further, unlocking new opportunities, and promoting cooperation across various sectors, ultimately benefiting both nations.
