A New Era in India’s Trade Policy
India’s recent trade deals with the United Arab Emirates (UAE), Switzerland, and now the United Kingdom signify a major transformation in its approach to free trade agreements (FTAs). These agreements are gradually opening up sectors that were previously considered sensitive or off-limits. According to a report by the Global Trade Research Initiative (GTRI), this shift reflects a broader strategy of engaging more deeply with international trade frameworks.
The report emphasized that these new agreements are focusing on critical areas such as government procurement, intellectual property rights, automobiles, data, and services. The India-UK FTA, in particular, is notable for moving past long-standing restrictions that India had maintained regarding domestic regulation and policy autonomy. As India continues to negotiate with other global players like the United States and the European Union, these developments could establish important precedents for future trade discussions.
GTRI highlighted that India’s recent trade deals follow a consistent pattern. Each agreement delves deeper into sensitive sectors, introduces new opportunities, and involves relinquishing control over certain policy domains.
Automotive Sector: A Major Shift
One of the most significant features of the India-UK FTA is the introduction of a Tariff Rate Quota (TRQ) system for UK-made passenger cars. This marks the first time India has offered an automobile tariff concession in any trade agreement. Under this system, India has agreed to reduce customs duties on large-engine petrol cars (over 3000 cc) and diesel cars (over 2500 cc), typically high-end luxury vehicles, from over 100 percent to just 10 percent over a period of 15 years.
The initial quota for such imports will be set at 10,000 units, increasing to 19,000 units by the fifth year. While these reduced duties apply only to vehicles within the TRQ quota, those outside the quota will continue to face high tariffs ranging from 95 percent to 50 percent depending on the vehicle type and year. This preferential treatment could benefit UK brands like Jaguar and Land Rover, owned by Tata Motors, and may prompt similar demands from other trade partners such as Japan, the EU, South Korea, and the US.
Government Procurement and Intellectual Property
The India-UK agreement also brings substantial changes to the government procurement sector. For the first time, India has agreed to open around 40,000 high-value contracts from central ministries and departments to UK bidders. These contracts span sectors such as transport, green energy, and infrastructure, marking a significant departure from India’s traditionally protectionist stance on public procurement.
In the intellectual property chapter, India made a notable concession by accepting language that could limit its ability to issue compulsory licenses. This tool has been crucial during public health emergencies to make life-saving medicines and technologies more affordable. India agreed to include wording that emphasizes “adequate remuneration” to patent holders, aligning with Article 31(h) of the TRIPS Agreement. Although this principle already exists in global IP norms, its explicit inclusion in a bilateral agreement makes it a binding obligation, potentially limiting India’s policy flexibility under domestic law.
Services Sector: Expanding Opportunities
India has also opened up key segments of its services economy to British firms. This includes accounting, auditing, financial services (with foreign direct investment (FDI) in insurance capped at 74 percent), telecom (allowing 100 percent FDI), environmental services, and auxiliary air transport. UK companies can now offer services like telecom and construction in India without establishing a local presence, and they will receive national treatment, meaning they will be treated equally as Indian companies.
Additionally, India has agreed to recognize UK professional qualifications in fields such as law and accounting, although the legal services market remains closed.
Broader Implications
Overall, the GTRI noted that the India-UK trade agreement goes beyond mere commercial interests. It reflects a broader shift in India’s trade policy, where the country is beginning to allow greater foreign access in key sectors. While these moves present new economic opportunities, they also bring challenges and set precedents that could shape India’s future trade relationships with other global partners.
