A dark cloud of uncertainty settled over the negotiations with the UK on a free trade agreement after the 37-day-old Liz Truss-led Tory government faced a grim battle of survival that seemed to scupper all chances of sewing up a deal.
Prime Minister Truss’s move to replace Chancellor Kwasi Karteng and repudiate his medium-term economic package to rescue the troubled economy meant that the UK would be less concerned about sealing the trade deal.
The trade deal — which the Modi government wanted to clinch by Diwali — had already run into trouble after the two sides bickered over a host of contentious issues. The failure to narrow those differences had already made the Diwali deadline look extremely dicey.
The latest crisis that has engulfed the Truss government raises questions over whether the current British regime can seal the deal at all.
Trade economist Biswajit Dhar of JNU said: “It is highly improbable that there would be a trade deal at this juncture when the UK economy is in a bad shape and they are in for a long winter.”
“They would rather be concentrating in putting their economy in order, amidst growing unemployment rather than give market access to a foreign country through any kind of trade deal.”
Matters had looked grim on Friday morning itself when external affairs ministry spokesperson Arindam Bagchi told reporters that the Diwali deadline had not been cast in stone.
“There was a general goal of trying to get it done by Diwali. But (the) goals are dependent on negotiations. So let me not complicate the negotiators’ lives by saying that it has yet to be done by a certain date.”
There was no official word from the Modi government on the latest developments in the UK and whether the crisis that the Truss government finds itself in at present will complicate the chances of clinching a trade deal.
Asked if India’s demand for more visas was holding up negotiations, Bagchi did not answer directly but said there was an understanding between both countries on “mobility and consular matters” which would require “mutual implementation”.
Last week, UK home secretary Suella Braverman said in an interview that she feared a trade deal with India would increase migration to the UK when Indians already represented the largest group of visa over-stayers.
“I have concerns about having an open borders migration policy with India because I don’t think that’s what people voted for with Brexit,” Braverman told The Spectator, a weekly news magazine.
Asked about visa flexibility for students and entrepreneurs under an India-UK FTA, she said: “But I do have some reservations. Look at migration in this country — the largest group of people who overstay are Indian migrants.”
Besides visas, the issues of contention include the reduction of import duties on wine and spirits and automobiles.
While India has agreed to tariff reduction in both areas, Britain wants steeper and faster cuts.
The UK is also eager for binding commitments in the area of procurements made by the Indian government and digital trade.
India also wants the resolution of regulatory issues in the pharmaceutical sector and duty concessions for textiles, footwear, leather products, and basmati rice.
The UK wants greater access to medical devices and legal, accounting and financial services.
Indian commerce ministry sources said there has been some progress on several issues and indicated that an initial deal could be signed and the unresolved issues could be taken up later.
Sources said the face-saver deal could depend on the visit of Modi to Britain likely to bein November. If the visit doestake place, the two sides could announce a modified trade agreement.
