India, UK to consider free trade pact after Brexit

Source: The Economic Times, Apr 05, 2017

NEW DELHI: India and the United Kingdom may look at a free trade agreement (FTA) after Britain formally leaves the European Union.

Finance minister Arun Jaitley and UK chancellor of the exchequer Philip Hammond discussed the possibility of FTA among other things on Tuesday at the 9th UKIndia economic and financial dialogue wherein Britain pitched for increased trade engagement with India.

The two leaders also agreed to set up a 240-million-pound fund, called Green Growth Equity Fund, — to finance clean energy projects. It would be a sub-fund of the Centre’s National Infrastructure and Investment Fund to boost infrastructure financing. On its part, India said a formal dialogue on a possible bilateral trade agreement can start only after the completion of Brexit, which is expected to take about two years.

British Parliament last month approved the Brexit Bill, paving the way for exit of the United Kingdom from the 27-nation EU. Jaitley said India in its communication with the UK government has stated that post Brexit it will look for more open trade, and more trade arrangements.

“Obviously, this can be formally discussed after the Brexit takes place, but it is probably going to imply a far wider and a far higher engagement between the two countries,” he said. “What shape it is going to take can only be formalised post Brexit negotiation,” he added.

Hammond pointed out that Britain is the largest G20 investor in India in the last 10 years, while India is the third largest investor in the UK.

“We have continued to consolidate past success and to identify new areas where we can work together over the next couple of years, preparing for the point where Britain leaves the EU and is able to engage with Indian colleagues in a deep discussion about a future FTA between the UK and India,” he said.

Hammond played down the risks of a so-called ‘hard Brexit’ in which Britain would lose access to the markets of the EU’s other 27 nations if the two sides cannot reach a consensus deal within a twoyear deadline.

“We have made the decision that we will not be part of the structure of the European Union, but we’ve also made it very clear that we want to negotiate the maximum possible open trade relationship with the European Union,” he said.

Jaitley said, “The United Kingdom, post-Brexit, is looking at a different level of relationship with India. And there’s a huge aspiration in India itself also, to add to, and improve on, this relationship.”

The UK is among India’s major trading partners and in 2014-15, it ranked 18th in the list of India’s top 25 trading partners.

At Tuesday’s discussions, both sides decided to enhance cooperation in sharing information on tax offenders. They also discussed efforts to make Indian rupee more freely tradeable on international markets, and promote ‘masala’ bonds for Indian companies to borrow in their own currency from investors in London. The UK expressed keenness over issuance of masala bonds in London by NHAI, IRFC and IREDA. Hammond however refused to comment on the extradition of businessman Vijay Mallya to India saying the matter was sub-judice.

 

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