Keir Starmer, leader of Britain’s Labour party, reacts as he speaks at a reception to celebrate his win in the election, at Tate Modern, in London, Britain, July 5, 2024. (Reuters)
UK Elections 2024: Experts say the new British government’s stance on visa rules, the India-UK FTA, and carbon tax policies should be watched closely.
Even as the Labour Party bagged a landslide victory in the UK’s general elections, sweeping away a 14-year era of Conservative Party rule, all eyes are on Britain’s trade relations with India going forward, which will impact Indian markets and investors. Experts said the new British government’s stance on visa rules, the India-UK FTA, and carbon tax policies should be watched closely.
Keir Starmer will officially become the UK’s prime minister later today after his Labour Party gained a landslide majority in Thursday’s parliamentary elections, dealing a bruising defeat to incumbent Rishi Sunak’s Conservative Party.
India-UK Free Trade Agreement
As the Labour Party is set to come to power in the UK, economic think tank GTRI said on Friday that it might approve the India-UK FTA with minor adjustments.
India and the UK launched talks for an FTA in January 2022 to boost economic ties between the two nations. So far, 14 rounds of discussions have taken place.
A market expert said, “There might be some delay in the India-UK FTA now as the Labour Party may want some changes. Because of this delay, some industries in India will benefit, while some will be at a loss. For the wine industry, it is good news as the FTA will bring in cheaper alcohol. However, for India’s IT, electrical, and fashion industries, the delay will be bad as the FTA will ensure greater market access for them.”
There are 26 chapters in the agreement, which include goods, services, investments, and intellectual property rights.
The bilateral trade between India and the UK increased to $21.34 billion in 2023-24 from $20.36 billion in 2022-23.
Visa Rules
India has been in talks with the UK for the past few years to relax visa rules as many Indians go there for IT and financial sector jobs. The country wants relaxation in conditions for the UK’s India Young Professionals Scheme, apart from easing conditions for changing jobs within the UK.
“The talks have been going in a positive direction so far, but now with the Labour Party coming into power, it might get affected,” the market expert said.
Carbon Tax
While the FTA might reduce or eliminate tariffs, Indian exports could still face hefty carbon taxes, unlike UK exports to India. The UK has been in favour of imposing the EU’s carbon tax.
“The Indian government wanted a concession on carbon tax, but the Labour Party has always been in favour of imposing a carbon tax,” the expert added.
However, on Friday, the UK’s new Prime Minister Keir Starmer pledged a “reset” not only for the country but also for the Labour Party’s relationship with the Indian diaspora to pursue a “new strategic partnership,” including an FTA, with India if his party won a strong mandate.
“I have a clear message for you all today: this is a changed Labour Party,” said Starmer at the India Global Forum (IGF) last year, setting the tone for the party’s India-UK outlook.
It is important to know that India is also an important market for the UK, the market expert said.
