India-UK Relations

IN NEWS:

• The United Kingdom Prime Minister Boris Johnson made an official visit to India last week.

HIGHLIGHTS OF THE VISIT:

• Prime Minister Narendra Modi and British Prime Minister Boris Johnson agreed on a new and expanded India-U.K. defence partnership and set an ambitious target of concluding a “comprehensive and balanced” free trade agreement (FTA) by Diwali this year to double bilateral trade by 2030.
• Both sides agreed to work together to meet new threats across land, sea, air space and cyber domains and the U.K. will partner with India on new fighter jet technology as well as in the maritime sphere to detect and respond to threats.
• The U.K. will issue an Open General Export Licence (OGEL) to support greater defence and security collaboration in the coming decade.
  • The OGEL will reduce bureaucratic interference and shorten delivery time for India’s defence procurement.
  • This is the first British OGEL in the Indo-Pacific region.
• The UK announced new measures to make it easier to export UK-made medical devices to India and ensure mutual recognition of UK higher education qualification.
• The two sides also launched a virtual Hydrogen Science and Innovation hub to accelerate affordable green hydrogen and unveiled plans in sync with the Green Grids Initiative announced at COP26.

BACKGROUND OF INDIA – UK RELATIONS:

• India and UK are bound by strong ties of history and culture.
• India and the UK enjoy long standing friendly ties and share a Strategic Partnership underpinned by mutual commitment to democracy, fundamental freedoms and the rule of law, strong complementarities and growing convergences.
• India’s multifaceted bilateral relationship with the UK intensified with its upgradation to a Strategic Partnership in 2004.
• The India-UK relationship was elevated to a Comprehensive Strategic Partnership during the India-UK virtual summit held between the Prime Minister of India, Narendra Modi, and the UK Prime Minister Boris Johnson in May last year.
  • At the summit, the two sides adopted a 10-year-roadmap (Roadmap 2030) to expand ties in the key areas of trade and economy, defence and security, climate change and people-to-people connections among others.

AREAS OF COOPERATION:

• Bilateral Economic and Trade Relationship
  • Bilateral Trade:
    • In 2021, India was the UK’s 15th largest trading partner, and the UK is India’s 18th largest trading partner.
    • The two-way trade between India and the UK is currently around $50 billion, including $35 billion of services and $15 billion of goods.
    • The UK is India’s seventh-largest export market, accounting for 2.8% of its total exports, as of June 2021.
    • According to Indian commerce ministry data, India’s trade surplus with the UK stood at $3.2 billion in 2020-21.
    • Manufacturing exports accounting for over 90 percent of India’s export to the UK, consisting of clothing, medicinal and pharmaceutical products, metal manufacturers, organic chemicals, and precious stones
    • The main imports from the UK to India are power generating machinery & equipment, non-ferrous metals, metalliferous ores & metal scrap, industrial machinery, transport equipment, beverages, electrical machinery, electrical appliances, professional - scientific instruments and chemical materials.
  • Investment:
    • The UK is the sixth-largest FDI source with a cumulative equity investment of 29.6 billion USD during April 2000 to September 2020, accounting for around 6 per cent of total FDI into India during the period.
    • The services sector attracted the highest FDI accounting for a 10.15 per cent share of total investment from the UK.
    • The UK is the largest European source of remittances to India
    • Indian firms operating in the UK
      • From Tata Global Beverage's purchase of the iconic Tetley tea and Jaguar-LandRover in UK to steel and mining giant ArcelorMittal, Indian companies have invested in UK.
      • The number of Indian firms operating in the UK increased from 800 in FY2017-18 to 850 during FY2019-20, employing over 110,793 people.
  • Bilateral Institutional Mechanisms:
    • India-UK Joint Economic and Trade Committee (JETCO) was established on January 13, 2005 to develop a strategic economic relationship following the Joint Declaration “India-UK towards a new and dynamic partnership” between the then Prime Ministers of the two countries in September 2004.
    • India-UK Economic and Financial Dialogue (EFD) was established on 4thFebruary 2005. The objective of the Dialogue is to strengthen the financial and economic relationship between India and the UK.
  • OTHER IMPORTANT INITIATIVES:
    • The Green Growth Equity Fund (GGEF):
      • GGEF is a joint initiative by the Governments of India and the UK under India’s flagship National Investment and Infrastructure Fund (NIIF).
      • This will provide a high-quality conduit for international institutional investment, including from the City of London, into green and renewable infrastructure projects in India.
    • Masala Bonds:
      • Having raised over 50% of the total aggregate amount originated globally, presently, 49 Masala bonds are listed on the London Stock Exchange.
    • Access India Programme:
      • High Commission of India, London initiated the ‘Access India Programme’ in September 2017 for facilitating investments by UK Small and mid-size enterprises (SMEs) in India.
• Defence Relations:
  • India and the UK signed the Defence and International Security Partnership (DISP) in November 2015 to provide a strategic roadmap and direction to the evolving India-UK Defence Relations.
  • A bilateral Defence Consultative Group (DCG) meeting has taken place annually between the top officials of the Defence Ministry since 1995.
  • Around 70 defence related companies across the UK supply various goods for aircraft/helicopter manufacturing/overhaul at HAL like ejection seats, fuel tank kits, hydraulic pumps, engine spares etc and support legacy platforms like Jaguar, Mirage & Kiran.
  • Ajeya Warrior (army-to-army biennial exercise), the Konakan (navy-to-navy annual exercise) and the Indradhanush (joint air-to-air exercise) happens between India and UK.
    • In 2021 India and the UK conducted Konkan Shakti 2021, the first-ever tri-services joint exercise.
• Education, Research and Innovation:
  • UK is among the favoured destinations for Indian students to pursue higher education.
    • Around 50000 Indian students are currently studying in UK.
  • UK is India’s second largest partner in Science and Technology collaborations.
    • The two sides are collaborating under institutionalized mechanisms like UK-India Education and Research Initiative (UKIERI) and through UK Research and Innovation (UKRI) programmes.
  • The two sides are discussing Global Innovation Programme, which will support Indian sustainable innovations to be scaled up and transferred to select developing countries.
• Climate and Environment:
  • India and UK closely engage on climate related issues through various mechanisms including the Ministerial Energy Dialogue (Sep, 2018), and Joint

Working Groups on Climate, Power and Renewables.

• • India-UK Green Growth Equity Fund is mobilising institutional investments in the renewable energy, waste management, electric mobility and environment sub-sectors in India.
• Health:
  • The Joint Working Group on Health and Life Sciences regularly meets to prioritise and coordinate bilateral cooperation in the health sector.
  • The successful partnership between Oxford University, AstraZeneca and SII on Covid19 vaccine demonstrated the potential of Indian and UK expertise working together to solve international challenges.
  • ‘Ayuryoga’ programme was launched in 2020 and started online modules to raise awareness and practise of Ayurveda and Yoga in UK.
• Multilateral Collaboration :
  • UK has been supportive of India's permanent membership of UNSC since 2004 and voted favourably in the roll-over decision on UNSC reforms to the 70th session of UNGA.
  • UK is also a strong supporter of India's membership of the NSG.
  • UK is also a member of ISA and supports its activities.
• Indian Diaspora:
  • The Indian Diaspora in UK is one of the largest ethnic minority communities in the country, including approximately 1.6 million British nationals of Indian origin and about 3,51,000 NRIs living in the UK equating to almost 2.5 percent of the UK population and contributing 6% of the country’s GDP.
  • At present there are sixteen Indian origin MPs in the UK Parliament and, out of these, five of them hold key Ministerial posts in the Government.

AREAS OF CONCERN:

• Challenges to finalize the free trade agreement (FTA)
  • There are certain challenges to finalize the free trade deal with UK, especially with regards to lowering tariffs in alcohol, automobile and dairy sectors.
    • India’s dairy sector is a sensitive area in trade deals with the UK and even Australia because of lack of reciprocal market access.
    • The UK has banned India’s dairy exports because they claim dairy products from India don’t meet certain regulatory standards, but India still accepts their dairy imports.
    • In the case of the liquor industry, there are similar non-tariff barriers.
    • The domestic alcoholic beverage industry is demanding that the UK remove a key requirement for whiskies and spirits to enter the UK market: three-year maturation.
      • The UK has a three-year maturation condition for imports, but India’s hot climate means spirit evaporates during the maturation process, causing losses and increasing costs.

• China’s role in the Indian Ocean
  • India is concerned about China’s growing influence in the region, including its investments in ports through the Belt and Road infrastructure initiative (BRI).
  • India has joined “Quad”, an informal grouping that aims to defend a “free and open Indo-Pacific”, widely seen as a response to growing Chinese influence.
  • The UK, by contrast, has engaged substantially with Belt and Road Initiative.

• AUKUS Partnership
  • Though the AUKUS partnership strengthens the QUAD and the multilateral structure opposed to China is a net strategic positive for India, India is concerned with change of power in Indo-Pacific as the U.S. is now promoting a security partnership with its English allies which India is not a part of.

• Colonial hangover
  • Anti-colonial resentment against Britain is always seething barely below the surface among the Indian political and bureaucratic classes.
  • Also, the bitter legacies of the Partition and Britain’s perceived tilt to Pakistan have long complicated the engagement between India and the UK.
• Impact of BREXIT
  • There are challenges associated with UK’s exit from EU ,like impact on Indian Diaspora, Indian companies in UK etc.
    • For example, Indian diaspora in Britain had voted against BREXIT because it is likely that Indian IT Professional in Britain will face tough competition when UK will open up its border for more skilled migration.
    • Also Brexit would inevitably impact more than 800 Indian companies in UK in crucial sectors of British economy.

WAY FORWARD:

• Concluding a “comprehensive and balanced” free trade agreement (FTA) will resolve market access issues, boost exports and strengthen trade partnership across a comprehensive range of areas.
• Enhance cooperation under the bilateral Extradition and Mutual Legal Assistance Treaties to facilitate speedy conclusion of extradition requests from both sides.
• Build on the excellent cooperation on the AstraZeneca/Oxford University Vaccine with India’s Serum Institute and explore manufacturing deals beyond Covid19 to tackle other infectious diseases and bring co-developed technologies to market.
• As co-chairs of the Coalition for Disaster Resilient Infrastructure (CDRI), reinforce cooperation on enhancing adaptation and climate change resilience across vulnerable communities, including Small Island Developing States.
• Enhance development of direct linkages and partnerships between higher educational institutions of both the countries Support and promote the two-way mobility of a greater number of students, teachers and researchers.
• Work together to strengthen global economic governance, partnering in multilateral economic fora such as G20, World Bank and IMF to strengthen global growth and tackle emerging issues.
• Strengthen cooperation to take decisive and concerted actions against globally-proscribed terrorists and terror entities.
• Promote and uphold a rules-based international system and work together to make international organizations, including the UN Security Council, more representative, reflecting contemporary realities, and more effective in addressing current global challenges.

PRACTICE QUESTION:

Q. Discuss the prospects and challenges associated with India-UK relationship with reference to “Roadmap 2030” adopted at the virtual summit in 2021.