The UK needs an India strategy that goes beyond the trade deal
The visit of British Foreign Secretary David Lammy to India in the first month of the new UK government has sent a clear signal to New Delhi that it is eager to conclude a free trade agreement (FTA) between both countries. In a speech shortly before the election, Lammy said ‘Labour is ready to go’ on the deal, adding that he saw the FTA ‘as the floor, not the ceiling in the relationship’. The third term Narendra Modi government in New Delhi also ensures continued momentum on the trade deal.
But the UK needs a strategy for India that goes beyond the FTA. This includes more progress in areas ranging from technology, defence, education and the energy transition, and it means taking practical steps in difficult areas, such as the UK’s visa policies. Establishing quotas for specific industries facing labour shortages or deemed strategically important – like nursing or IT professionals – would address both the UK’s desire to tighten immigration, and the fact that Indians are among the largest group of legal migrants to the UK in recent years.
Continuity and change under Labour
Sir Keir Starmer has led a concerted effort to improve Labour Party’s relationship with India which had become strained under the previous leadership of Jeremy Corbyn, in part thanks to a Labour motion calling for ‘international intervention’ on the disputed territory of Kashmir.
The new government has also inherited the accomplishments of previous Conservative administrations, notably a 2030 roadmap or the bilateral relationship, the establishment of the first ‘2+2’ (foreign and defence ministers’) dialogue between both countries, and the conclusion of an Enhanced Cyber Partnership. New Delhi has also been happy to see the UK de-linking its relations with India and Pakistan, which had become intertwined with the UK’s military intervention in Afghanistan.
However, not everything has gone smoothly – especially the inability to conclude the trade deal under the previous government (missing the initial deadline of Diwali 2022). No UK prime minister has visited India since 2016, although this probably reflects the UK’s domestic political turmoil as much as it does signs of benign neglect in the UK-India relationship. Allegations that the UK has become a hub for absconding Indians and groups engaged in activities that challenge India’s status and sovereignty has also become a thorn in the bilateral relationship.
Strategically significant trade deal
After 14 rounds of negotiation, consensus has reportedly been reached on most of the 26 chapters of the trade deal. Progress stalled in March as both countries went into election mode and New Delhi perceived Rishi Sunak as a lame duck, so wanted to wait until after the UK election to restart negotiations.
Key outstanding issues include visa and mobility rules for skilled Indian professionals, social security (National Insurance) contributions by Indian workers on intra-company transfers and improved access for UK services and goods, including electric vehicles and several food and drink products, to the Indian market. New Delhi is also seeking exemptions from a proposed UK carbon tax and both countries are negotiating a parallel Bilateral Investment Treaty.
Yet while both sides remain committed to concluding the deal, New Delhi has refused to set a specific deadline and will use Lammy’s visit to assess if the new UK government’s position on the FTA has shifted in key areas from its predecessor’s. It’s thought Labour is likely to adopt a similar position on the visa/mobility issue while taking a harder line on the proposed carbon tax, given the need to reaffirm its climate credentials.
For India, the conclusion of a deal could grant New Delhi more leverage in negotiations with other more significant trade partners, such as with the European Union.
The trade deal remains strategically important to both countries. India is the second-largest source of foreign investment to the UK, while Indian exports to the UK are six times that of Russia (although far less than its trade with the United States and China).
The free trade agreement would be the most significant such deal for the UK since the Brexit vote of 2016, with pledges to double bilateral trade by 2030 and assessments that it would enhance the UK’s GDP by around £3.3 billion by 2035 (in 2019 prices), equivalent to an increase of 0.22 per cent.
For India, the conclusion of a deal could grant New Delhi more leverage in negotiations with other more significant trade partners, such as with the European Union, which are ongoing. Beyond the specifics of the deal itself, the FTA is also important in symbolising a renewed commitment by both countries towards the bilateral relationship.
The UK has fallen down the list of priority countries for New Delhi, despite longstanding bonds of a common language and legal system, and the so-called ‘living bridge’ of diaspora links. Progress remains limited in other areas, such as technology, defence, education and the energy transition. Even in Europe, France is arguably India’s most important strategic partner: only three per cent of India’s defence acquisitions came from the UK over the last decade while France has emerged as India’s second largest arms supplier after Russia.
The need to appease multiple constituencies – not only the 1.9 million British Indian community, but also the 1.2 million Pakistani diaspora in the UK – will remain a challenge for the UK government. Violence between British Hindu and Muslim communities in Leicester in 2022 demonstrates how geopolitical tensions in South Asia can spill over onto the streets of the UK.
Under the Modi government there has also been a proclivity to engage overseas Indian communities – India has the world’s largest diaspora. While this can be a source of strength in India’s bilateral relations, it can also cause instability. Of particular relevance to the UK given its sizable Sikh population was last year’s downturn in India-Canada relations following allegations of Indian complicity in the murder of a Sikh Canadian national who was a supporter of the Khalistan separatist movement.
India will also be watching whether the new Labour government has the means and motivation to sustain the previous administration’s Indo-Pacific ‘ given its fiscal constraints and preoccupation with other foreign policy priorities.
There is a risk that the approach gets downgraded for ideological reasons if the new government perceives the ‘tilt’ a legacy of the previous government’s post-Brexit foreign policy. Lammy’s India’s visit, which will be followed by his meeting with the ASEAN Foreign Ministers in Laos, aims to dispel these concerns.
Both countries’ relations with third parties, including the United States, EU, China and Russia will also play a role. A more confrontational UK-China relationship will raise the value of India as an alternative market and source of investment. Alternatively, an escalation of the war in Ukraine will draw further scrutiny of New Delhi’s relations with Moscow.
The significance of the UK’s relationship with India goes beyond the bilateral relationship, and even beyond this much-pursued trade deal. It has implications for the UK’s engagement with the Global South, the global economy and the creation of a bulwark against China.
David Lammy’s visit is an opportunity to move the relationship on to a new footing – but to do that he must conclude the FTA, quash historical concerns about the Labour Party’s perceived anti-India bias and build on the accomplishments of the previous government, all while reframing relations with India through the UK’s broader foreign policy priorities.
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