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India-UK Trade Talks Set to End With Key Issues Unresolved

(Bloomberg) -- The latest round of trade talks between the UK and India appears set to end without a breakthrough on major outstanding issues, according to people familiar with the negotiations, meaning agreement is unlikely to be reached before India holds a general election.

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UK officials flew back from New Delhi on Thursday night and Friday, with people close to both negotiating teams saying there were still hurdles to be overcome in goods, services and investment areas.

Indian negotiators don’t have sufficient time to engage on the pending issues ahead of elections likely in April, two people familiar with the development said, refusing to be identified as the discussions are private. That means the 14th round of talks is likely to close without further discussions.

The two sides hope to regroup after the election, which Prime Minister Narendra Modi’s Bharatiya Janata Party seems poised to win for the third term.

In the UK, the task of clinching a deal may not fall to Prime Minister Rishi Sunak, whose Conservative Party is more than 20 percentage points behind Keir Starmer’s Labour Party in opinion polls. A British general election is expected to be held in the second half of the year.

A free-trade agreement with India, the most populous nation on the planet and fastest-growing major economy, is being touted by Sunak’s government as a key prize of Brexit. However, negotiations that were meant to be concluded by the Hindu festival of Diwali in October 2022 have been plagued by disputes over everything from visas for Indian workers and students to market access for UK makers of whisky and premium cars.

So far, new FTAs have only been agreed with Australia and New Zealand, and those deals have riled British farmers. Talks with Canada were “paused” earlier this year, with the two sides unable to reach agreement on issues around food safety standards.

In a last push before India heads to the polls, a team from UK was in India to iron out the pending issues. However, chinks remain. There are residual issues over investment protection, social security agreements and market access for British apples and cheese among others.

A spokesperson for Britain’s Department for Business and Trade said: “We have always been clear we will only sign a deal that is fair, balanced and ultimately in the best interests of the British people and the economy. The UK and India continue to work towards an ambitious trade deal that works for both countries.” India’s trade ministry did not respond to an email outside business hours.

If concluded, the trade deal — which has been under discussion for more than two years — would be India’s most ambitious yet, underscoring the country’s growing appeal as an alternative for investors looking for supply-chain diversification and less reliance on China. It would also act as a springboard for a free trade deal that India is currently negotiating with the European Union.

India has been working on forging deeper ties with its major trading partners as it seeks to become a manufacturing powerhouse and create jobs for millions of youth joining the workforce every year.

The two countries launched trade negotiations in January 2022 after Modi and his British then-counterpart Boris Johnson announced they would work on a comprehensive trade agreement to boost jobs and businesses in May 2021.

Total bilateral trade between India and the UK increased to $20.36 billion in 2022-23 from $17.5 billion in 2021-22.

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