India-UK Trade Deal: Potential Benefits for Consumers
Welspun Living, known for producing towels for Wimbledon, is gearing up to take advantage of the new India-UK free trade agreement (FTA) that has recently come into effect. The Indian company, which supplies textiles to major UK retailers, is among many businesses poised to benefit from the agreement.
The FTA, involving two of the world's largest economies, aims to eliminate or reduce tariffs on 99% of Indian exports to the UK and 90% of UK imports to India. The British government has touted this as its most significant bilateral trade pact since leaving the EU, predicting a GDP increase of 0.13%, or £4.8 billion, and a 0.06% rise for India, amounting to £5.1 billion annually in the long term.
Textiles, garments, footwear, and automotive sectors are expected to witness substantial growth due to the agreement. Dipali Goenka, CEO of Welspun Living, anticipates a double-digit increase in exports to the UK, attributing previous competitive disadvantages to tariffs that India faced compared to countries like Bangladesh and Pakistan.
Impact on British Spirits Industry
The trade pact also offers potential benefits for British alcohol exporters. It reduces customs duties on Scotch whisky from 150% to 75% immediately, with a further reduction to 40% over the next decade. Avneet Singh of Modern Drinks Pvt Ltd notes that these changes could boost imports significantly, although the full effects will become evident over time.
To maximize the benefits, companies are focusing on logistical and compliance preparedness, ensuring all necessary trade documentation is in order to take advantage of the revised tariff structures.
Incremental Changes Expected
While specific industries may experience notable gains, experts suggest that the overall impact of the FTA might be more gradual. According to the Global Trade Research Initiative (GTRI), a significant portion of Indian exports to the UK already enter duty-free under the most favoured nation regime. Additionally, major imports from the UK, such as silver, remain outside the agreement.
The real test of the FTA's success will be whether sectors previously subject to UK tariffs, such as textiles, garments, and seafood, see increased export volumes and profit margins. However, unresolved issues like tariffs on steel imports and the UK's proposed carbon tax could pose challenges to fully realizing the deal's potential.
Non-Tariff Barriers and Future Prospects
Despite tariff reductions, non-tariff barriers remain an obstacle. Historically, India has underutilized FTAs, with many small businesses unaware of the new regulations. For Indian exporters to fully benefit, they must understand and leverage these changes in negotiations with UK buyers.
According to CareEdge Research, the timing of the FTA is opportune for India, especially in ready-made garments (RMG). China, the largest player in the UK's RMG market, is losing competitiveness, and India could double its market share from 6% to 12% in the near to medium term.
Overall, bilateral trade could grow by 15% annually, outpacing the current rate of 10-12%, with consumers on both sides benefiting from improved product quality and variety.
Source: Original Article
