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Mint
07-05-2025
- Business
- Mint
India-UK FTA: Can exporters seize the opportunity amid tough competition?
NEW DELHI : With US tariffs looming and global trade uncertainty rising, India's exporters are turning to a newly signed free trade agreement (FTA) with the UK as a crucial lifeline—one that eliminates tariffs on nearly 100% of Indian exports and opens a vital market for textiles, gems, and engineering goods. The deal comes just as higher tariffs from the US threaten to disrupt key export sectors, prompting Indian businesses to recalibrate their strategies. The UK's zero-duty access positions it as a strategic alternative, particularly as Indian exporters grapple with the US decision to impose an additional 26% duty on Indian products—a measure temporarily paused until July 8. The bilateral trade agreement (BTA) with the US is not expected until the fall of 2025 (September to November) 'The UK has now become a strategic alternative, offering zero-duty access for labour-intensive exports such as apparel, garments, handmade jewellery, and engineering goods," said Dattesh Parulekar, assistant professor of International Relations at Goa University. Read this | Foreign car firms eye trade deals for EV tariff reduction However, while the UK's zero-duty access is an enticing offer, experts warn that the real challenge for Indian exporters will be adapting to the competitive dynamics of the UK market. 'The trade deal definitely holds promise, but the real gains will depend on how quickly Indian exporters can adapt to the UK's competitive market," said Abhash Kumar, trade economist and assistant professor of economics at Delhi University. 'Lower tariffs are just one part of the equation—our businesses also need to meet quality norms, delivery expectations, and stay compliant with global standards." While the FTA, finalized after 14 rounds of negotiations over three years, is expected to boost sectors like engineering and textiles, India's MSMEs could find themselves on the losing end. 'India's decision to open up government procurement to British firms, while UK procurement remains largely closed, creates a deeply unequal playing field," said Ajay Srivastava, co-founder of the Global Trade Research Initiative. 'UK firms will gain preferential access to India's vast public contracts, but Indian companies are unlikely to win much business in return." According to Srivastava, less than 0.5% of EU procurement goes to non-EU suppliers, and even in the UK, foreign firms secure no more than £20 billion in contracts annually. 'Indian firms, especially MSMEs, are not equipped to navigate that market," he said. Read this | India, EU discuss textile duty relief in exchange for whisky concessions under FTA 'Beyond economics, this move weakens India's strategic policy space to build domestic capacity in critical sectors like defence, clean energy, and health. It also threatens the survival of local MSMEs that depend on public contracts for growth and stability," he added. Despite concerns, some sectors are poised to gain. Engineering exports to the UK are projected to nearly double over the next five years, reaching around $7.55 billion by 2029-30, according to Pankaj Chadha, chairman of the Engineering Export Promotion Council (EEPC). The UK is currently India's sixth-largest engineering export destination, with exports rising 11.7% to $4.01 billion in FY25. Exports of chemicals and allied products increased from $1.29 billion in FY22 to $2.68 billion in FY25, while engineering goods exports—including auto components, industrial machinery, and transport equipment—rose from $3.04 billion to $4.01 billion over the same period. In the textile sector, the FTA offers a chance to reclaim lost ground. After declining to $1.97 billion in FY24, textile exports to the UK rebounded to $2.12 billion in FY25, driven by strong demand for mid- to high-end garments. The UK imports about $19 billion worth of apparel annually, with India accounting for just 5-5.5% of that market, well behind China and Bangladesh. Sudhir Sekhri, chairman of the Apparel Export Promotion Council (AEPC), noted that UK buyers, particularly those sourcing mid-to high-end garments, are already responding positively to the pricing advantage. In the gems and jewellery sector, the tariff elimination could double exports within a year, according to Vipul Shah, former chairman of the Gems and Jewellery Export Promotion Council. Exports to the UK, which reached $941 million in FY24, are poised to surge as duties of up to 4% are slashed to zero. India's agricultural exporters are also eyeing substantial gains. Under the FTA, several agricultural and processed food products will see duties reduced to zero. For animal products, which are currently subject to duties of up to 20%, 99.3% of tariff lines will be exempt from duties. Similarly, vegetable and oil products, which also face duties of up to 20%, will benefit from 99.8% of tariff lines being reduced to zero duty. Processed food products, which can face duties as high as 70%, will see 99.7% of tariff lines brought down to zero duty. This reduction is expected to significantly enhance India's export competitiveness in these sectors. The UK market's appetite for Indian staples—like rice, spices, seafood, and processed foods—has already driven agricultural exports from $571.16 million in FY22 to $784.57 million in FY25. Read this | New template for trade deals: Govt to focus on tariffs, non-tariff barriers to clinch early agreements Binod Anand, a member of the government's MSP Committee of Agriculture, emphasized the FTA's potential to boost farmer incomes, particularly if cooperatives are mobilized to capitalize on the duty-free access. The agreement also has implications for the logistics sector. 'For logistics providers, the FTA offers more than tariff relief—it removes bottlenecks, improving the speed and efficiency of high-value cargo shipments, including electronics and fuels. Looking ahead, it lays the groundwork for collaboration with UK logistics innovators to integrate advanced technologies like AI-driven supply chains and automation into multimodal operations," said Jitendra Srivastava, CEO of Triton Maritime & Logistics. The trade agreement is expected to push bilateral trade to $120 billion by 2030, marking a significant step in India's post-Brexit engagement with the UK. But with UK firms set to benefit more than their Indian counterparts in public contracts, the FTA's true value for India's exporters remains to be seen. Also read | India could learn much from the complaints of its trade partners UK Prime Minister Keir Starmer, meanwhile, has dismissed criticisms of the deal, describing concerns over tax exemptions as "incoherent nonsense" and insisting that the deal is in Britain's economic interest. 'Trade deals with 50 other countries have similar clauses," Starmer argued, referring to concerns over tax exemptions.
Mint
02-05-2025
- Business
- Mint
Services boost India's exports to an all-time high of $824.9 billion in FY25
India's exports rose 6.01% year-on-year to an all-time high of $824.9 billion in 2024-25, propelled by a 13.6% on-year rise in services exports to a record $387.5 billion, showed the Reserve Bank of India's (RBI) final services trade data released on Friday. March alone saw services exports surge 18.6% on-year to $35.6 billion, reflecting continued global demand for India's IT, business, financial, and travel-related services, the RBI said. The merchandise segment also contributed to the overall rise, with non-petroleum goods exports reaching a new peak of $374.1 billion in 2024-25, up 6% from $352.9 billion a year ago. This is the highest annual figure for India's non-petroleum merchandise shipments, offering some reassurance when traditional goods exports have been under pressure from tightening global demand and geopolitical disruptions. This sharp rise in exports, which stood at $778.1 billion in 2023-24, comes when India is actively working to expand its trade footprint via bilateral and multilateral agreements, and is positioning itself as a resilient, service-driven exports economy amid shifting global supply chains. India is attempting to consolidate its global trade presence through ongoing free trade agreement negotiations, particularly with the European Union and the UK, and amid efforts to mitigate the impact of retaliatory tariffs introduced by the US. Experts see the performance as an indication of India's growing competitiveness in high-value services and diversified goods sectors. 'The rise in exports reflects the better performance of the manufacturing sector, which is completing a strong turnaround driven by resilient global demand, improved logistics, and government incentives under schemes like performance-linked incentives,' said Abhash Kumar, an economist. While petroleum and other commodity-linked exports remained relatively subdued due to volatile global prices, the continued expansion in digitally driven services and value-added manufacturing suggests a structural shift in India's exports composition. The RBI numbers are likely to boost policymakers' efforts to promote trade-led growth as part of India's broader 2047 development vision. Meanwhile, India's trade surplus with the US jumped 16.6% in 2024-25, ballooning to $41.18 billion from $35.32 billion a year ago, even as US President Donald Trump prepared to hike US tariffs in protest. According to 15 April commerce ministry data, Indian goods exports to the US rose by 11.6%, from $77.52 billion in 2023-24 to $86.51 billion in 2024-25. Imports from the US also rose, but just 7.42%, from $42.20 billion to $45.33 billion. Globally, India's trade deficit widened sharply to $21.54 billion in March, rising from a three-year low of $14.05 billion in February. Merchandise exports for the fiscal year stood at $437.42 billion, marginally higher than the $437.07 billion recorded a year ago, while imports stood at $720.24 billion, up from $678.21 billion in 2023-24, showed the commerce ministry data. March's goods exports stood at $41.97 billion and imports at $63.51 billion, compared with $36.91 billion of exports and $50.96 billion of imports in February. First Published: 2 May 2025, 06:15 PM IST
