The UK’s decision to leave the European Union presents a potential upside for both India and the UK in numerous ways, especially in the area of free trade agreement between the two countries.
Britain being the biggest trading partner in EU for India, a trade pact with the country seems like a favourable option in a post-Brexit scenario.
India and the EU have so far been unable to reach a free trade agreement, with negotiations having become mired in the financial politics of the 28 countries of the EU. Now unencumbered by the rest of the EU, the UK will benefit by boosting trade ties with India and other similarly placed countries. India’s economy grew at more than 7 per cent last year, and is forecast to grow at 8 per cent this year faster than any larger economy in the world.
FTA with the UK is expected to be beneficial to India especially in the backdrop of recent trade formations among countries which exclude India, such as, the proposed Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU, and the Trans-Pacific Partnership (TPP) trade pact among 12 countries, including the US, Japan, Malaysia, Vietnam, Singapore, Canada, Mexico, Brunei, Australia, New Zealand, Chile and Peru.
Brexit is likely to compel London to seek a more robust trade relationship with New Delhi, an effort for which was seen recently.
Within 3 days of taking power British Prime Minister Theresa May has sent one of her senior colleagues, Sajid Javid, Secretary of State for Communities and Local Government, to India. Sajid first went to Mumbai, met the Tata bosses and discussed the future of the beleaguered Tata Talbot Steelworks operation in the UK, the sale of which the Indian steel giant has now put on hold for the time being. He then went to New Delhi where he met Nirmala Sitharaman, India's Minister of state for commerce and Industry (Independent Charge). Sajid said his discussion with Sitharaman “was very positive and constructive. India and the UK already have a very strong trade and investment relations and we are looking at how we can go further and look forward to working with her”.
Similar initiatives of Free Trade Agreements have already begun with Australia, USA and other select countries.
In terms of trade – India's main exports to the UK are textiles, machinery, petroleum products, software and IT enabled services, leather, gems and jewellery, among others. Imports from the UK are equipment, ores and metal scraps, precious and semiprecious stones, silver, metals, aircraft parts, spirits, engineering goods and instruments.
In terms of services – excluding travel, transport and banking, as per UK's Office for National Statistics, India-UK bilateral trade in services in 2014 amounted to about £2.5 billion. India's exports in 2013 amounted to £1.5 billion and imports in 2014 amounted to £975 million.
In terms of investment – UK is the third largest inward investor in India, after Mauritius and Singapore with a cumulative equity investment of $22.56 billion (April 2000 to September 2015). UK ranks first among the G20 countries and accounts for around 9% of all FDI into India (April 2000 to September 2015)
Now, free trade does not mean it is completely “free”. The free trade within EU is entirely without any duty (on imports and exports). Equally there is free access to people within EU borders which was the bugbear during the Brexit debate – a large number of EU nationals especially from newer member states making a beeline to the UK.
The FTA with India, Australia and USA cannot replicate what was and what is happening in EU countries. At the same time one should remember that India and the UK have several mutually beneficial trade sectors of complementary advantage, which needs to be tapped.
In the financial year 2016, India's exports to the EU were $35.35 billion, while India's exports to Britain were $9.35 billion. The UK is the largest G20 investor in India, while India invests more in the UK than the rest of the European Union combined. India is also the third largest source of FDI for the UK. Several Indian MNCs are biggest employers in the UK.
India's rising middle classes, incremental progress in GDP, its democracy, demand and demography have enormous attractions, especially for the UK.
Similarly, the Indian corporations are keen to invest abroad and have by and large both financial and other capabilities. Within a span of a generation Indian multi-national companies have brought a sea change in investments abroad, particularly in the UK.
Old hands of the “free trade” deliberations of almost 100 years ago will be naturally very cautious. And so they should be. But India has to also remember that with whatever attraction and attachment it has with the UK, the EU takes a lion's share of India's exports in some very important industries and businesses (like apparel, diamond, software, etc.). But sources from Delhi say Britain will benefit to have FTA with India to secure best possible deal with Brussels prior to it invoking Article 50 of the EU. A bilateral agreement between India and UK will solve a lot of business problems. The deal will be the best solution for the future. This assumes significance as the UK is India's largest business partner, with more than 30% of exports going to the UK. A free trade agreement between India and the EU has been held up for nine years over contentious issues. A bilateral trade agreement could be easier and faster to make.
Though there are challenges ahead, the odds are in favour of the UK retaining and even accelerating economic progress even after the shock of 23rd June, 2016.
Rule of law prevails
The Supreme Court of India, in a brutally forthright judgment, overturned the Governor of Arunachal Pradesh’s decision to dismiss the previous Congress State government led by former chief minister Nabam Tuki and replaced it with a regime composed of Congress dissidents, led by the present Chief Minister, Kalikho Pul, backed by the opposition BJP. A five-judge constitution bench of Justices J.S.Khehar, Dipak Misra, Madan Lokur, P.C. Ghose and N.V.Ramana issued a unanimous verdict that the Governor’s decision was illegal and ordered the deposed government to be reinstated forthwith. The judgment was passed on the basis of Article 356 of the Constitution. Two months ago, the Supreme Court struck down .Governor’s Rule in Uttarkhand, clearing the way for the Harish Rawat-led Congress government to return and resume its proper authority. The Supreme Court has reduced the discretionary powers of State governors; they have been instructed to shut their eyes and ears to intrigues and political horse trading and abide strictly by the rules, under which a chief minister is required to prove his party’s majority in the legislative assembly.
Arunachal Chief Minister Pul, flanked by BJP President Amit Shah, appeared to strike a note of defiance, saying that he would file a review petition. ‘We will file a review petition on this ruling after going into all aspects of it.’ The BJP National Secretary Shrikant Sharma, defiantly claimed that the crisis in Arunachal Pradesh had nothing to do with his party, but was an internal Congress matter, for which the BJP had been made a scapegoat. There were taped conversations before the court that proved otherwise.
Kapil Sibal, a former Congress minister at the Centre, and a Supreme Court lawyer, demanded the Arunachal Governor be asked to resign. Refusal to do so should be followed by his dismissal for his role in the affair. The uproar has not been confined to the Congress party. The Bharatiya Janata Dal (BJD) whip in the Lok Sabha, Tathgata Satpathy, said: ‘We shall certainly be raising the issue, not as an anti-BJP or pro-Congress measure, but to highlight the fact that the Centre has been trying strong-arm democratically elected governments out of power and that this should stop.’
BSP leader Mayawati said the Centre should ‘take lessons from the [Supreme] court verdict.’ Communist Party of India (Marxist) General Secretary, Sitaram Yechury, said the issue would be taken up in Parliament. Clearly, this subject will not die quietly. The Modi government has case to answer. The Supreme Court has overwhelmingly upheld the rule of law. The country’s executive authority can do no less. Democratic governance must transcend individual or party loyalties.
A new vote of confidence is to be held shortly. The present BJP-backed Pul regime may well retain power. The issue is the Constitutional impropriety of the dismissal of its Congress predecessor. Rules ogf governance must be obeyed.
