Labour-intensive goods to get benefit from FTA with UK

New Delhi India’s high quality labour-intensive goods such as apparel, footwear, carpets and cars will benefit from the removal of import duties by the UK, under the proposed free trade agreement between the two countries, according to think tank GTRI.

However, the overall gains for India will be limited because most of the goods from here are already entering the UK at low or zero tariffs (import or customs duties), the Global Trade Research Initiative (GTRI) said. In 2022-23, India’s merchandise exports to the UK were valued at $11.41 billion and out of this, $6 billion worth of goods such as petroleum products, medicines, diamonds, machine parts, airplanes, and wooden furniture entered Britain at zero levy, it said. “The FTA is expected to have a limited impact on increasing these exports because over half of Indian products already enter the UK with low or no tariffs. The average duty on goods imported from India into the UK is 4.2 per cent,” GTRI Co-Founder Ajay Srivastava said. However, there will be gains from reducing duties for Indian exports worth $5 billion and those items include textiles, apparel (shirts, trousers, women’s dresses, bed linen), footwear, carpets, cars, marine products, grapes, and mangoes. “These products face relatively low to moderate tariffs in the UK,” he said. Citing examples, the think tank said that duties on yarn and fabric are 4 per cent, while tariffs on shirts, trousers, women’s dresses, and bed linen range from 10 per cent to 12 per cent. Similarly, handbags and trunk cases attract 8 per cent tariffs, levies on footwear vary from 4 per cent to 16 per cent. These products will benefit from the FTA’s tariff reductions by the UK.

Chief negotiators of both the countries are negotiating the pact in the national capital and talks are at a crucial stage, as the negotiations are expected to close by end of this month. GTRI added that while the duty elimination in the UK can help Indian exports, significant growth requires improvements in product quality and signing an FTA alone may not lead to a substantial increase in India’s labour-intensive goods exports. For instance, India’s textiles and apparel exports to Japan did not see significant gains from the free trade agreement, Srivastava said. From 2007-09 to 2019-21, India’s exports to Japan grew from $257.7 million to $368.6 million, a cumulative growth of 43.1 per cent, while India’s global exports grew by about 67.9 per cent during the same period. Therefore, the modest increase in exports to Japan may be attributed to natural growth factors rather than the FTA, he added. Further, UK exporters would gain immediately after India eliminates high tariffs on most British products, it said. India’s merchandise imports from the UK were $8.96 billion in 2022-23. Out of this, it said, 91 per cent of total merchandise imports from the UK enter India on payment of average to high tariffs duties. For example, the tariff on cars is 100 per cent and on Scotch whisky and wines are 150 per cent.

The simple average tariff in India on goods imported from the UK is 14.6 per cent, it added. According to GTRI, British products which will gain from the FTA (free trade agreement)-led tariff reductions include precious metals (silver, unwrought platinum and gold, diamonds); metal scrap (aluminium, copper waste); petroleum products; scotch and other alcohol; machinery (turbojet, taps, valves); medicine; and make up items.