Transformative moment in UK-India relations lost in political turmoil

India and UK need to accelerate negotiations on free trade agreement

When historians look at the United Kingdom in the year 2022, it would perhaps almost certainly rank right at the top of the biggest washouts for the country, in all senses of the word. In the year 2022, the country, already rocked by an ill-advised and terribly-implemented Brexit and crippled, like the rest of the world, by the Covid-19 pandemic, had the opportunity to put the blunders and the troubles of the past behind and restore economic growth and help the country move forward from a fresh start.

Instead, the year 2022 will be remembered as one of the most dramatic, most tumultuous and certainly the most damaging year in modern British politics. Like the reruns of a horror film, Britain saw a political meltdown, the likes of which have not been seen ever in the centuries-old parliamentary system of the country. Downing Street, or more specifically, No. 10 Downing Street, the official residence of the Prime Minister, almost turned into revolving door with an in-built ejection seat.

First to go was the flamboyant Boris Johnson who fell victim to his opponents within the Conservative Party after it became clear that Johnson had been partying in his official home and office, while the entire country had been placed under a strict lockdown and was suffering from a series of unprecedented crises. Liz Truss, who replaced Boris Johnson, now holds the unenviable title for the British PM with the shortest stint as she was forced to quit within 45 days of taking oath, mainly due to her unplanned tax cuts for the wealthy, that sent the Pound Sterling plunging to historic lows.

Her departure plunged Britain into profound and unprecedented political crisis made waves across Europe and beyond, with her economic policies forcing commentators and politicians alike questioning how Britain could have fallen so far, so fast, and so much.

No wonder, in the space of four months, the country saw three Prime Ministers, leading to a chaotic situation that the UK has never seen and hopefully will not have to go through such ignominy ever again. Even as the drama on the Downing Street was continuing, the political turmoil became almost complete when the country lost its longest-serving monarch, Queen Elizabeth II, whose presence for over 70 years in the throne at the Buckingham Palace did provide the country with a prolonged sense of stability and security. Indeed, the Queen saw 15 individuals come as British PMs.

Thus, her death on September 8 removed the last shred of stability from the British political system. And now, the country is in the midst of a cost-of-living crisis that threatens to engulf the ruling Conservative Party and could provide yet more political surprises.

Slipping at home

Not surprisingly, while the country has had to pay a heavy price domestically for the instability, its external ties have also suffered tremendously as almost all the discussions with its key partners, economic or political, were put on a standby mode while the ruling party tried to find a viable PM.

The UK economy is in a terrible shape. Over the last couple of years, it has been hit hard by Brexit, Covid-19, and now the consequences of the Russia-Ukraine war. Brexit made Boris Johnson the Prime Minister of Britain and “Partygate” cost him his office. But most commentators and experts have blamed Brexit the root cause of the crisis – economic, political, and social. Nothing paralysed the country so much as the fatal consequences of leaving the European Union, the biggest mistake in recent British history. Brexit has cost the UK a staggering GBP 33 billion in lost trade and investment and the economic damage is even worse than previously feared.

Rishi Sunak, who helped engineer Johnson’s downfall, got the honour of trying to pick up the pieces as Britain’s first Prime Minister of colour. Britain has fallen in a recession with inflation running at a record 15 pc, partly because of skyrocketing energy prices in the wake of Russia’s invasion of Ukraine. Sunak faces daunting headwinds to confront the challenges. Amid these economic challenges, trade union action of this week has further devastated Britain mounting pressure on the country’s economic health.

And abroad

The political instability has also cost the country heavily in terms of its external relations, notably with the key partners like India. Since taking office PM Sunak has tried to reshape UK’s relations with India but with limited success.

One of the biggest setbacks has been on the UK-India relations as ever since Brexit, successive British PMs have been keen on signing a Free Trade Agreement with India as a way to make for the economic losses suffered by leaving the EU.

Opportunities that Brexit offered to India and Britain to create a trade history were lost in the political turmoil in UK and also due to the lack of proper understanding and imagination of the challenges both countries have to finalise the free trade deal.

But hopefully some good can still come out of it. In a very encouraging sign, it seems that the new British Prime Minister Rishi Sunak wants to change the UK-India relationship to make it a more balanced two-way exchange that opens easier access to UK for Indian students and companies.

The year 2022 may not have brought any impressive evidence of the deep ties between India and the UK, nevertheless both countries are on track to move to a new height in future.

Changing dynamics in UK-India relations

Future historians may come to regard 2022 as a hinge in history, marking the end of one era and the beginning of another. There was nothing very significant in UK-India relations during the year. Policies and programmes pursued during the year were in the background of the relationship which was elevated to a comprehensive strategic partnership during the virtual summit between Prime Minister Narendra Modi and Boris Johnson in 2021.

The two sides had adopted the 10-year road map to expand ties in trade and investment, defence and security, climate change, healthcare and people-to-people ties. Based on the Enhanced Trade Partnership (ETP) in May 2021 both countries commenced negotiations for a comprehensive Free Trade Agreement (FTA) in January 2022. The ETP formed part of the ‘2030 Roadmap’ for future UK-India relations and was highlighted during Prime Minister Boris Johnson’s visit to India.

While political drama was being played in London, in September 2022, India became the fifth largest economy in the world by overtaking the United Kingdom. It is widely believed that India’s economic and political rise will have both domestic and global implications including the geo-political impact and might alter the nature of the country’s foreign relations with powerful countries including Britain.

Free trade negotiations: on and off the track

A Free Trade Agreement between India and the UK is expected to enhance economic growth and prosperity by increasing import and export flows; increasing investment flows (both outward and inward); enhancing productivity through a more efficient allocation of resources; and greater openness to international competition.

A key benefit is expected to be the removal of trade barriers and the UK Government has already indicated removing tariffs will benefit UK exports, as currently only 3 pc of product lines on UK exports to India are tariff free. Further, India deploys more technical barriers to trade as well as sanitary and phytosanitary measures than the UK, where an FTA can benefit UK businesses exporting commodities to India.

On a practical level, Indian and UK businesses will take comfort from the 2030 Roadmap. Its framework sets aim for future UK-Indian relations in priority areas beyond the FTA – such as migration, education and culture. Following talks between Prime Ministers Johnson and Modi in April 2022, the UK indicated that it might make concessions in the area of immigration. India had previously expressed a desire that her citizens have easier access to the UK as part of any trade deal.

The FTA is the most exciting feature of the rapidly developing economic partnership. Reduction in tariffs will facilitate increased competitiveness in industries like auto and pharma. On January 13, 2022, UK government announced the launch of free trade agreement (FTA) negotiations with India. This move was described as a golden opportunity, of putting British businesses at the front of Indian economy. Prime Minister Narendra Modi had set a very ambitious desire to get the India-UK Free Trade Agreement signed by Diwali, or  October 24, with his counterpart to match the pace and ambition of the FTA.

However, this was almost undone when Home Secretary Suella Braverman publicly condemned Indian migrants who overstayed their visas and said that the visa norms needed to be tightened.

Thus, it was a bit surprising that while Prime Minister Sunak has said he is keen to rebuild ties with India, his decision to reappoint Braverman as Home Secretary did come as a surprise. One hopes that Sunak’s more liberal views on immigration and the fact he is likely to hold a tighter party line than his predecessor Liz Truss, could assuage concerns in India.

But none of this means that in a strengthened UK-India relationship, the UK-India free trade deal is a given deal and an agreement can be reached which will provide clear benefits to the UK, then negotiations around the deal might get back on track under Sunak.

Despite missed free trade deadline the UK-India trade soared during the year. British trade with India has hit its highest recorded level ever.  According to British Department of International Trade, total trade in goods and services (exports plus imports) between the UK and India was GBP 29.6 billion in the four quarters to the end of Q2 2022, an increase of 37.1 pc. Total UK exports to India amounted to GBP 12.1 billion, an increase of 43.3 pc over previous year. Total UK imports from India amounted to GBP 17.5 billion, an increase of 33.1 pc over the preceding period.

On December 12, British Secretary of State for International Trade Kemi Badenoch visited India to initiate the sixth round of the UK-India Free Trade Agreement (FTA) negotiations. There is little doubt as to India’s strategic importance to UK, as well as the critical role it will play on the global stage in this century.

Now as the new year dawns, it is imperative that both the countries put the year gone by in the dustbin of history, where it belongs, and start with fresh energy and new ideas to rapidly conclude the elusive deal.