With Sunak at helm, will India-UK economic ties deepen?

The depth of the economic relationship between the two countries is evident from the fact that India is currently the second largest foreign investor in the UK. As many as 850 Indian companies operate there while 600 British companies are located here. The UK is the sixth largest inward investor in the India

It is still a moot point whether the first Indian origin Prime Minister of the UK Rishi Sunak will deepen the economic relationship with India or put it on the backburner in an attempt to assuage the right wing elements of the Conservative Party. His Home Secretary Suella Braverman has been one of the strongest critics of the proposed free trade agreement with this country. It is thus looking increasingly that the FTA will take more time to be finalised than had been envisaged earlier. The original target for concluding an early harvest deal had been Diwali, but this has now passed. A final date for its completion now looks set to be in 2023.

In any case, the political turmoil that led to Prime Ministers changing rapidly in the UK came at a time when bilateral economic ties seemed set for a big leap forward. This was largely due to expectations over the outcome of the FTA. It had been viewed as a major development by Boris Johnson last year and later by his successor, Liz Truss. As a result, negotiations continued without a break despite the changes at the helm.

But the UK is now preoccupied with the economic crisis arising out of the disastrous financial policies of the earlier Truss government. Whether Sunak will have the time to pay attention to this element of India-UK ties is doubtful. But the prospects for concluding it in a hurry had dimmed even before the departure of Truss as Prime Minister. The climate for congenial talks became frosty as soon as then Home Secretary Suella Braverman expressed her reservations about the trade deal. This was specifically on the grounds it could make immigration easier for Indians, who were known for overstaying their visas. The remarks had vitiated the atmosphere but there was still a determination on both sides to move ahead right till the political scenario changed dramatically last week in the UK.

And this was because both India and the UK were determined to finalise this trade deal as soon as possible. For the British, the need to conclude a bilateral pact with a major economy had become imperative after Brexit meant it had burnt its bridges with Europe. At the time, it was envisaged that the first country to be a willing trade partner would be old and trusted ally, the US. On the contrary, that country made it clear it would not be interested in negotiating an FTA for the time being. This was conceded last month by Truss when she stressed that the focus would be on joining the 11 member Trans -Pacific Partnership as well as bilateral trade pacts with states in the Gulf region and India.

Entering into a trade deal with India is advantageous to the UK for several reasons. One is that it has now become the world's fifth largest economy, matching the UK in size. It thus gives access to a huge market for British industry. Second, there have been hopes that the heavy tariffs on products like whisky and spirits will be reduced, enhancing the market for these quintessentially English products.

It was also felt that in return, some of the demands for easier visas for professional skilled workers could be acceded to as this would not be in the nature of immigration but more about business mobility. Till Brexit, the demand for skilled workers has been met largely through an influx from neighbouring European countries, where visa curbs were not an issue. Some of the demand for professional workers could thus be met from India. Though, it is precisely in this area that Braverman's remarks on immigration issues have created roadblocks.

India has been equally anxious to conclude the FTA, given the need to provide support to exporters in terms of lower tariffs in key markets. It has stayed away from the large multilateral grouping, the Regional Comprehensive Economic Partnership (RCEP), in a bid to avoid cheap imports from China entering via third countries. In the process, it has lost out on preferential tariffs available to the member countries. To overcome this handicap, efforts are being made to stitch up bilateral trade deals and the one with the UK has been viewed as having the most potential.

The fact is, the deal has been seen as a prestige one on both sides. One reason is the special relationship dating back to the colonial era. Though there is resentment over the fact that the UK left India in a state of an abject poverty at the time of independence, ties have matured over the years. This has come along with the expanding and influential role of the Indian diaspora in that country, evident in the landmark development of an Indian origin person becoming Prime Minister.

The depth of the economic relationship between the two countries is evident from the fact that India is currently the second largest foreign investor in the UK. As many as 850 Indian companies operate there while 600 British companies are located here. The UK is the sixth largest inward investor in the India. The future of the India-UK economic relationship now depends largely on the direction sought to be taken by the new Prime Minister. While he may be keen to deepen it, he is bound to be constrained by elements in his party like Braverman who consider easing visa issues to be tantamount to promoting immigration. Whether he is able to emphasise the economic benefits to the UK by cutting tariffs and easing visa curbs will have to be seen in the coming months. There is no doubt this country will pin its hopes on Rishi Sunak giving a high priority to stronger bilateral ties. But much will depend on how far this will fit into his plans for reviving the crisis-hit British economy.