The agreement will create significant benefits for both countries and could almost double UK exports to India, boosting UK total trade by up to $37.7bn a year by 2035
The UK’s trade deal with India could provide the UK with a bigger deal than its defunct agreement with the US, new research has shown, although it carries more uncertainty and risk.
According to the Resolution Foundation, Britain’s pivot towards closer trade ties with the Indo-Pacific region could deliver big economic benefits after the UK’s exit from the European Union.
Its latest report for The Economy2030 Inquiry with the London Stock Exchange, funded by the Nuffield Foundation, said that much of the focus around the UK’s pivot towards Asia is around its ambition to become the first European nation to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
This agreement could cover 8% of current UK trade.
However, as the UK already has Free Trade Agreements (FTAs) with 95% of CPTPP members, a trade agreement with India could have a far bigger impact.
The Foundation said that India is a faster growing economy than the CPTPP bloc, whose imports are expected to grow at below the world average in the years ahead.
The agreement will create significant benefits for both countries and could almost double UK exports to India, boosting UK total trade by up to £28bn ($37.7bn) a year by 2035, and increasing wages by up to £3bn.
The short-term benefits for UK supply chains are, however, limited by the two countries’ trade being less complementary, meaning Indian exports are less well matched to UK import demand.
UK firms exporting to India currently face far higher tariffs — 19% on average — than they do to the US at 2%, ‘so there is far more scope for trade liberalisation’, the report said.
Securing an FTA with India could also give UK firms a ‘first mover’ competitive advantage over exporting firms in the US and EU, which don’t have preferential access to the Indian economy.
India is forecast to become the world’s third largest import market by 2050, while its demand for business, telecommunications and computer services — sectors where UK export firms already perform well — is expected to treble over the course of the 2020s.