The recently signed India-UK trade agreement introduces a "co-equal" rule, designed to simplify the process for businesses to claim benefits under the Free Trade Agreement (FTA). This rule offers greater flexibility, particularly for goods like chemicals and steel, allowing producers to meet origin criteria more easily. The agreement, finalized after three years of negotiations, is expected to significantly boost bilateral trade and create new economic opportunities for both nations.
Key Features of the Co-Equal Rule
The "co-equal" rule provides an alternative pathway for goods to qualify for preferential treatment under the FTA. Instead of adhering to a single, rigid set of origin criteria, producers can choose to meet any one of several established standards. This is particularly beneficial for industries dealing with complex supply chains or products with multiple components. By offering this flexibility, the co-equal rule aims to reduce the administrative burden on businesses and encourage greater utilization of the FTA's benefits.
Benefits for Indian Businesses
The India-UK FTA is expected to provide duty-free access to the UK market for 99% of Indian goods. This will significantly benefit sectors such as textiles, engineering products, jewelry, pharmaceuticals, and electric vehicles, which previously faced high duties. The elimination of these barriers will give Indian producers a competitive edge and increase their export potential. Furthermore, Indian service providers in IT, legal, telecom, and finance will gain easier access to the UK's services market.
Impact on Specific Sectors
The agreement is poised to deliver significant advantages for both nations’ industries:
Economic Projections
The UK government projects a £4.8 billion annual boost to its economy, with UK exports to India expected to rise by nearly 60%, adding £15.7 billion by 2040. Bilateral trade is anticipated to increase by 39%, equivalent to £25.5 billion annually by 2040. The agreement is also expected to create thousands of jobs in both countries.
Comparison to Previous Trade Agreements
The India-UK FTA differs from earlier agreements with simpler origin rules. While elaborate rules of origin have been created for the first time, they were referenced in the Australia pact. These rules are designed to prevent FTA circumvention and the import of substandard goods into India.
Overall Impact
The India-UK Free Trade Agreement represents a significant milestone in the economic relationship between the two countries. By reducing tariffs, simplifying trade procedures, and promoting investment, the agreement is expected to boost economic growth, create jobs, and foster greater collaboration between India and the UK. The co-equal rule, in particular, is a welcome addition that will make it easier for businesses to take advantage of the FTA's benefits and contribute to the growth of bilateral trade.
