What does PM Modi expect from Rishi Sunak?

New Delhi: Britain's first Indian-origin Prime Minister Rishi Sunak and Prime Minister Narendra Modi spoke to each other for the first time on October 27 evening, agreeing on "the importance of early conclusion of a balanced trade deal" between India and the UK as well as work to strengthen their strategic ties. 

Sunak thanked Modi for his "kind words as I get started in my new role."

In fact, both are expected to hold their first meeting on November 15-16 on the sidelines of the G20 summit in Bali.

Will their meeting set the momentum for reaching a free trade agreement (FTA) between the two nations?

Perhaps, a forward movement is reasonably possible if one goes by the mood set by their first conversation.

FTA is the most anticipated thing in India-UK ties as it would also increase UK exports to India and open up the UK for Indian services and products.

Of course, Modi knows that Sunak has so many priorities to fix the economy of the UK.

An FTA may not be very high on the list. For the next few days, at least, if not for months, Sunak will be focused on the UK's crisis caused by its exit from the European Union or what is known as "Brexit."

The Ukraine war too is a big headache for Sunak.  The UK is grappling with high inflation and burgeoning energy costs for its residents.

Nevertheless, Sunak knows for a quantum leap in the relationship between the two countries, an FTA is a must.

Sunak has previously favoured an early FTA between India and the UK because of the opportunities that would open up for both countries.

FTA missed its Diwali deadline set by ex-UK PM Boris Johnson during his visit to India in April earlier this year. Last May, Liz Truss, as International Trade Secretary in the then Boris Johnson-led government, even signed the India-UK Enhanced Trade Partnership (ETP).

In fact, both countries are supposed to have concluded the fifth round of FTA talks. Technical experts from both sides worked on detailed draft treaty text in 85 separate sessions, which dealt with 15 policy areas. However, a common ground eluded them on certain sensitive issues.

Basically, FTA is a deal between two countries to remove the trade barriers between them. It allows buying and selling of goods and services with little to no tariff and non-tariff barriers between the participants.

The best of each other's resources and markets will be available for one another so that their economies benefit by faster growth -- while meeting the needs of the consumers.

What are the sticking points?

Just before Truss bowed out, UK home secretary Suella Braverman’s remarks on Indian immigrants caused a storm. As part of FTA, India has been pressing for greater opportunities for Indians to live and work in the UK. It also expects a lowering of fees and relaxing of rules for Indian students and professionals who are moving to the UK.

In a bid to please her Conservative Party hardliners, Braverman thought best to mock the existing state of Indian migration to the UK, suggesting that "a majority of visa overstayers in the UK are from India."  

She also had concerns about having open borders migration policy with India  and said "because I don’t think that’s what people voted for with Brexit.”

Her utterances did not go down well with Modi's establishment. Consequently, an early FTA looked impossible before Braverman resigned, triggering a spate of events that finally led to the resignation of Truss herself as prime minister of the UK.

Sunak was appointed as PM in place of Truss by the Conservatives. The news cheered India -- because he is the first Indian-origin person to lead the UK, and the first non-white, person of colour to become the UK's PM.

At 42, he is also the youngest person to take the office in more than 200 years.

Modi did not mince words in seeing Sunak as the “living bridge of UK Indians” and looked forward to working together with him to transform the India-UK ties into a modern partnership.

Yes, Sunak has inducted Braverman into his government and retained her as the home secretary though she had quit amid differences with Truss and also faced charges involving breach of security laws.

Recently, UK Trade Department Minister Greg Hands, who has also retained his portfolio, said that the UK will sign FTA with India only when the deal is "fair and reciprocal." 

But the October 27 conversation between Modi and Sunak should have brought some cheer to both sides.

For Modi, not just FTA, there are also other things to sort out with Sunak. We will deal with them later.

Today, manufacturing accounts for over 90% of India's exports to the UK, led by ready-made garments and textiles, gems and jewellery, engineering goods, petroleum and petrochemical products, transport equipment and parts, spices, metal products, machinery and instruments, pharmaceuticals, and marine items. 

The UK is also one of the largest markets in Europe for Indian IT services. With an FTA in place, India hopes to increase exports of tobacco, pharmaceuticals, food and beverages, leather, textiles and jewellery to Britain.

On the other hand, Britain eyes India's middle class for selling premium Scotch Whisky and wines to India. Therefore, it insists on the reduction of 150% of import duty. 

The UK also wants duty concessions for imported automobiles, apples, pears, quinces, and lamb meat. 

It wants to gain market access to digital and data, legal services, medical devices, transport equipment, chemicals,  electrical equipment, certain fruits and vegetables, motor vehicles and parts. 

India also wants the resolution of regulatory issues in the pharmaceutical sector and duty concessions for textiles, footwear, leather products and basmati rice. 

The UK insists on greater access to the Indian medical devices market and legal, accounting and financial services.

In 2021, India was the UK's 15th largest trading partner, and the UK is India's 18th largest trading partner. The UK is considered the sixth-largest source of FDI for India, with inflows of $32 billion between April 2000 and June 2022. The UK is also the seventh-largest export destination for India.

The India-UK bilateral trade in goods was $16 billion in 2021-22, an increase of 22.17% from $13.11 billion in 2020-21. Exports were worth $9.43 billion, against imports of $6.59 billion, resulting in a positive trade balance of $2.84 billion in FY22. In the current financial year 2022-23 so far, the India-UK bilateral trade stood at $8.85 billion. That is 40 per cent higher year-on-year as compared with $6.28 billion in the year-ago corresponding period, according to official data. 

Both India and the UK aim for their bilateral trade to reach $100 billion by 2030.

Undoubtedly, an FTA between India and the UK will create employment opportunities, growth, and other opportunities for both countries. It is also expected to give a major boost to Indian exports in labour-intensive sectors, including leather, textile, jewellery, and processed agro products.

Other issues on Modi's mind

Modi would also want Sunak to act against radical Khalistani elements who are openly collecting funds in gurudwaras in Britain and radicalising Sikh youth against India. This issue has been raised by Indian officials with their British counterparts. 

So far, India was disappointed that the British authorities allowed protests outside the Indian High Commission over the abrogation of Article 370 dealing with the status of Jammu and Kashmir. The recent outbreak of Hindu-Muslim tension in Leicester also figured in New Delhi's missives to London.

Modi is also unhappy that India's efforts to bring back economic offenders like Vijay Mallya, Nirav Modi and others from the UK were resisted by the British system. Modi would want the UK government to extradite all white-collar criminals.

Modi will also not mince words in conveying to Sunak that the UK often tends to be soft on terrorism inspired by Pakistan because of its impact on local politics due to the presence of a large Muslim community from the sub-continent in the UK.

Lastly, Modi would like Sunak to review the UK's role in helping the Pakistani interests in Afghanistan before the Taliban took over. Sunak can change things and Modi would be more than willing to respond in ample measure.