India-UK Free Trade Agreement: Why India Must Negotiate Strategically

As India and the United Kingdom resume negotiations on a Free Trade Agreement (FTA), Bilateral Investment Treaty (BIT), and Double Taxation Avoidance Agreement (DTAA), we must approach these discussions with clarity and confidence. The UK, grappling with post-Brexit economic uncertainty, is looking for access to India’s vast and growing market. But a trade deal must serve both nations, not just one. If they want entry into our financial sector, our skilled professionals must receive equal treatment. This negotiation isn’t about making quick concessions—it’s about ensuring a fair, strategic partnership that respects India’s long-term interests.

The Free Trade Agreement (FTA) aims to reduce tariffs and trade barriers between India and the UK, facilitating smoother access to each other’s markets. The Bilateral Investment Treaty (BIT) is designed to protect investments made by businesses in both countries, ensuring fair treatment and legal safeguards. Meanwhile, the Double Taxation Avoidance Agreement (DTAA) prevents businesses and individuals from being taxed twice on the same income in both nations, strengthening economic cooperation and preventing undue financial burdens. Together, these agreements serve as the foundation of future India-UK economic ties, but their execution must be balanced to ensure India’s interests are not compromised.

Beyond these agreements, India is advocating for a Social Security Agreement (SSA) or a Double Contribution Convention Agreement (DCCA) to protect Indian professionals working in the UK. Currently, businesses sending skilled workers on short-term assignments are required to make social security contributions in both countries, increasing financial strain. To address this, India seeks a framework similar to agreements it has signed with Belgium, Germany, and Australia, ensuring that workers posted abroad do not pay duplicate contributions and can transfer their benefits when they return home.

Context and Current Situation

The UK is in a desperate position to finalize the FTA due to economic slowdowns and Brexit-related trade challenges. India, on the other hand, has a strong growth trajectory and does not need to rush into an agreement that does not serve its interests.

• The UK stands to gain from lower tariffs on Scotch whisky, luxury vehicles, and financial services, yet India’s essential demands are still unmet. These demands include enhanced access for service providers, mutual recognition of professional qualifications, equitable intellectual property rights, better access to agricultural markets, and the establishment of a social security agreement.
• India must take its time and ensure that the agreement is favorable, rather than signing a rushed deal to accommodate the UK’s political timeline.
• India has no immediate elections, allowing for meticulous negotiations without political pressure. In contrast, the current UK Labour government has lost geopolitical support from the Democrats following Trump's election as US President, and it has also experienced a decline in domestic favor due to a weak economy, rising prices, and threats related to Islamism.

The UK’s Asymmetric Demands: Dairy & Agriculture

The UK is pushing for greater access to India's dairy and agricultural markets, seeking lower tariffs on British dairy products, cheese, and processed foods. However, when India raises the demand for better market access for Indian agricultural exports, such as basmati rice, mangoes, and spices, the UK resists, citing regulatory barriers and quality concerns. This creates a one-sided dynamic where British farmers gain new markets while Indian farmers remain restricted.

India's Position Should Be:

• Any concession on UK dairy imports should be contingent upon reciprocal market access for Indian agricultural products.
• Given India’s strong domestic dairy industry, reducing tariffs on British dairy must be carefully evaluated to protect local farmers and producers.
• The UK cannot expect a one-way benefit—a balanced trade agreement must address India’s agricultural export ambitions.

British Financial Services vs. Indian IT & BPO: A Double Standard

The UK is aggressively seeking liberalization of India’s banking and financial services sector, allowing British firms to operate with fewer restrictions. However, when India requests easier visa norms and market access for its IT and BPO professionals, the UK remains reluctant, citing concerns over immigration and labor market impact.

India's Position Should Be:

• If the UK wants access to India's financial sector, it must reciprocate by facilitating Indian IT, BPO, and fintech companies in the UK.
• The UK benefits significantly from India’s globally competitive IT sector, and restrictive policies on Indian professionals create an unfair playing field.
• A trade deal cannot be skewed in favor of UK interests—India must secure equal gains in services trade.

The Rolls-Royce Engine Deal: Trade & Defense Must Go Hand in Hand

Beyond trade, India has strategic interests in securing technology transfer agreements for advanced defense capabilities. The ongoing Rolls-Royce jet engine deal should be negotiated in parallel with the FTA, ensuring that India gains both economic and defense advantages.

India's Position Should Be:

• Any trade concessions for the UK must be linked to clear guidelines on technology transfer under the Rolls-Royce engine deal.
• Defense technology cooperation must not be separated from trade negotiations—both agreements should progress simultaneously.
• India must secure critical defense capabilities as part of the broader UK-India strategic partnership.

Geopolitical Considerations: The UK’s History of Undermining India

Additionally, it is crucial to recognize the geopolitical dynamics at play. The UK has been known to fund Pakistan and various anti-Indian NGOs, acting as a borrowed hand for US hegemonic interests to undermine India's growth & stability and thus its rise as a global power. Such actions highlight the need for India to be vigilant and strategic in its negotiations, ensuring that any agreement does not compromise its national interests.

Conclusion: No Need to Rush—India Holds the Stronger Hand

India must approach the Free Trade Agreement (FTA) negotiations with strategic patience and assertiveness. The UK stands to gain more from this deal, given its post-Brexit economic challenges. New Delhi should resist any external pressure to finalize a rushed agreement that does not align with its long-term interests.

A truly mutually beneficial FTA must ensure:

• Fair trade in agriculture, addressing the UK's asymmetric demands.
• Equitable access to services, ensuring Indian IT, BPO, and professionals receive reciprocal treatment.
• Strategic defense cooperation, including technology transfers in critical sectors like aerospace.

With India’s rapidly expanding economy and rising global influence, our bargaining power will only grow stronger in the coming years. Rather than settling for a suboptimal deal, India must negotiate from a position of strength, ensuring that every aspect of the agreement serves its economic, strategic, and national interests.

- Lakshman Sagar

@Lakshmansagar2