Policy Update
Ayush Bansal
Background
India and the United Kingdom (UK) enjoy a long economic partnership, reinforced by strong cultural, political, and trade links. Bilateral goods and services trade remained close to USD 21 billion in 2023, with services accounting for approximately 60% of India’s GDP and a sizable portion of global exports (Government of India, 2024). Free Trade Agreement (FTA) negotiations were launched in 2022 with a view to increasing market access, investment, and employment.
Though goods trade has been the focus of much attention, the services sector, especially IT, financial, legal, and professional services, is crucial for both countries. For India, the UK is one of the major destinations for IT exports, higher education services, and skilled professionals. The UK, in turn, needs improved access to financial services, legal consultancy, and creative industries.
(Source: Times of India)
Functioning of the proposed FTA
- IT and BPM Professionals: Faster work visas and smoother recognition of qualifications mean Indian coders and consultants can serve UK clients without unnecessary delays.
- Students and Educators: Joint degree programs, credit recognition, and scholarships could reduce the financial strain on Indian families while enriching UK campuses.
- Doctors, Nurses, Accountants: A mutual recognition framework could allow Indian professionals to practice in the UK, addressing existing skill shortages.
- Finance and Legal Services: British firms hope for smoother entry into India’s growing financial ecosystem, potentially creating jobs and training opportunities for Indian youth.
Performance
Some real impacts are already visible even before the FTA is finalized:
- IT and BPM Services: Indian IT exports to the UK form nearly 8–9% of the sector’s exports, with firms like TCS and Infosys employing thousands. Visa restrictions, however, raise costs and reduce agility in project deployment.
- Education: The UK hosted over 120,000 Indian students in 2023, contributing billions to its education economy. This mobility enriches British classrooms while strengthening India’s skilled workforce.
- Healthcare: Around 30,000 Indian doctors and nurses play a vital role in the NHS, filling critical shortages. Yet, recognition of Indian medical qualifications remains slow and uneven.
- Financial and Professional Services: The UK is a major investor in India’s finance and insurance sectors, bringing capital and innovation. Indian professionals in law and accountancy, however, face regulatory hurdles in the UK.
- Investment and Employment: Indian firms are among the largest foreign employers in the UK, particularly in tech and pharma. Meanwhile, British investments in India’s services, from consultancy to fintech, continue to expand steadily.
Impact Assessment
For ordinary citizens, the FTA’s services chapter could be transformative:
- For Indian Professionals: Imagine a young IT engineer flying to London on a project without waiting months for visa clearance. Reduced restrictions can unlock opportunities abroad while boosting India’s global footprint.
- For UK Students and Patients: Greater cooperation with Indian universities could deliver cheaper education, while qualified Indian healthcare workers can alleviate NHS staffing gaps.
- For Small Businesses: UK start-ups partnering with Indian software firms can grow faster, and Indian law firms can acquire global practices from British associations.
- For Families: Lower tuition fees and portability of qualifications globally would ease the financial and emotional burden on middle-class families spending on foreign education and careers.
Geopolitical Context
Global trade is in flux. The United States has repeatedly adjusted tariffs on steel, aluminium, and certain technology products, while tightening visa norms for professionals. For Indian exporters, especially in IT and engineering, these shifts have created uncertainty and higher costs.
Against this backdrop, the UK offers an alternative partner. For the UK, the post-Brexit strategy has created pressure to secure new markets beyond the European Union. India, with its large services sector and young, skilled workforce, is central to Britain’s “Global Britain” vision.
For India, diversifying trade partnerships is equally urgent. With ongoing tensions in the WTO, stalled progress on the India–EU FTA, and increasing competition with China in global supply chains, London offers a strategic partner. Similarly, firms looking to diversify away from U.S. markets see London as a gateway to both Europe and the Atlantic world. The UK’s support for India’s role in the Indo-Pacific and alignment on digital trade, climate commitments, and technology means the FTA is not just an economic document but a diplomatic tool.
Recent developments have further added weight. The 2024 UK general election returned a government keen on stronger ties with India to offset economic uncertainty. Meanwhile, India’s G20 presidency in 2023 projected it as a services powerhouse, adding momentum to FTA negotiations. Together, these factors underline why the FTA is both a commercial and strategic necessity.
Emerging Issues
Yet, every opportunity carries risks:
- Visa Sensitivities: Britain is still politically hesitant on immigration. Though India requires mobility for its professionals, British public opinion could be opposed.
- Regulatory Challenges: Granting law, medicine, or accountancy degrees is opposed by professional associations’ need to maintain standards.
- Digital Data: An upstart Bengaluru businessman dealing with client information from the UK can be vulnerable to compliance doubt due to India’s emerging data protection regulations.
- Unequal Gains: Indian giants can grow quicker, while small companies can struggle to compete with UK giants entering India.
- Global Geopolitics: The post-Brexit UK shift towards India also translates into higher expectations. If negotiations hit a roadblock, it will test diplomatic goodwill.
Way Forward
- Mobility with Dignity: Negotiate visa channels that safeguard skilled migration while being sensitive to domestic concerns. A streamlined “India Talent Visa” could be a game-changer.
- Accessible Education: Joint scholarships and affordable credit facilities can make studying abroad less burdensome for Indian families.
- Professional Recognition: Expedited agreements in IT, healthcare, and accountancy would enable professionals to start quickly.
- Digital Bridges: A shared framework for safeguarding data enables entrepreneurs on both sides to innovate without worrying about lawsuits.
- Inclusive Growth: Gradual entry of UK firms into India’s legal and financial spheres can enable local participants to adapt while customers avail new services.
Conclusion
The India–UK FTA is equally packed with opportunities to transform the services sector, which forms the backbone of the Indian economy. In addressing issues of mobility, regulatory recognition, and digital trade, the agreement can foster competitiveness, create jobs, and spur innovation. But an equilibrium between liberalization and capacity-building in domestic areas is still essential to be attained. If implemented, the FTA would be a model services-driven free trade agreement that strengthens India’s position in the world services value chain and further consolidates its strategic engagement with the UK.
References
About the Contributor
Ayush Bansal is a research intern at IMPRI (Impact and Policy Research Institute), and is currently pursuing his master’s in economics from Gokhale Institute of Politics and Economics, Pune.
Acknowledgment
The author sincerely thanks the IMPRI team for their valuable support.
Disclaimer
All views expressed in the article belong solely to the author and not necessarily to the organization.
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