Win-win, or win-some-lose-some? As Prime Minister Narendra Modi and British counterpart Keir Starmer gave the official stamp of approval to the India-UK comprehensive trade agreement (CETA) on Thursday, the focus now is on the gainers, and by logical correlation, losers, too. Which country and which all sectors gain more, or is it that there will be gains all around?
“When you do a trade deal, there are pros and cons, so many nuances which will play out as time goes,” Rajiv Memani, president of India’s largest business body, the CII had told this correspondent earlier this month. Of course, while he was referring to the vexatious negotiations for the India-US treaty, it could well be applicable to the FTA signed today by Britain and its erstwhile colony, as well.
The most-talked-about is the gains India’s garment and leather exporters are set to garner, considering that duties ranging between 8 and 16 per cent on them will now go, replaced by a '99 per cent duty-free' regime. This, along with similar concessions for the gems and jewellery sector, as well as manufacturers of heavy machinery, chemicals and plastics, is particularly significant politically, too, as these sectors give employment to hundreds of thousands of ordinary Indians across hubs ranging from Punjab to UP and Tamil Nadu.
Engineering sector also gains. The UK imports $193 billion worth of such products, while India’s contribution is just above $4 billion. With tariff elimination up to 18 per cent under CETA, industry analysts believe exports in this sector to the UK could double in the next five years.
However, not everyone gets off easily. Auto industry is a curious example, split down the middle thanks to the agreement. The deal allows British premium cars to enter India at 10 per cent duty — compare that to the 140 per cent or so many had to pay till now. This means some domestic car makers, especially those making electric cars, will face a disadvantage.
But the irony is that the automobile components sector now faces zero duty, which means Indian ancillary companies can now hope to cater to not just India’s burgeoning auto market, but also sell parts to British car makers, too. It is no accident that the Automobile Component Manufacturers Association of India (ACMA) was quick to applaud the CETA while SIAM, the carmakers body, was mum as of this article going live.
“This agreement (will) foster greater value chain integration between the Indian and British automotive industries. (It will) benefit the Indian auto component sector through enhanced opportunities for exports, streamlined regulatory processes, particularly in key areas such as electric mobility, precision engineering, and lightweight materials,” said ACMA president Shradha Suri Marwah.
Other local sectors which face an avalanche of British goods will include alcoholic beverages (duties on the likes of Johnnie Walker Scotch Whisky will drop from 150 per cent down to 40 per cent over a period of a few years), as well as small scale engineering, medtech firms etc.
“Concerns persist about sector-specific impacts - particularly potential job losses in Indian manufacturing linked to automobiles, alcohol, and cosmetics,” pointed out Pallavi Bakhru, partner and UK Corridor Leader at Grant Thornton Bharat, but she sees the silver lining — “I see this as a catalyst for Indian businesses to strengthen their competitiveness. It also sets a high bar for UK firms seeking sustained market presence.”
Of particular worry is the permission given to British firms to bid for Indian government procurement contracts. This could hit Indian small businesses and contractors adversely, though it would be interesting to watch how the British firms will adapt to the rough and tumble of Indian government wheeling and dealing. This, coupled with some sectoral leeway could hit many Indian MSMEs adversely.
“The India–UK FTA marks a watershed moment, providing enhanced market access along with greater certainty for Indian exporters,” said Anant Goenka, senior vice president of FICCI. Business apart, there are gains for Indian consumers, too. Beyond whisky, quality imported items that are set to get cheaper include cosmetics and processed foods. Which, of course, mean Indian premium brands in all these sectors could face a challenge.