Prime Minister Narendra Modi heads to Britain after a two-day stop in Sweden, beginning Monday.
In the UK, he will attend the Commonwealth Heads of Government Meeting (CHOGM). That apart, he is to meet his counterpart there, Theresa May, for talks on completing a potential trade deal, in the backdrop of Britain’s membership of the European Union (EU) expected to end next March (‘Brexit’), two years from the day it formally filed a notice to quit. There is no withdrawal treaty yet and the possibility of a legal limbo awaits all British businesses. There are Indian multinational companies also worrying about losing the common market of the EU when Britain leaves the bloc. Modi’s three-day visit to Britain in November, 2015 had seen both governments agreeing on Rs 900 billion in commercial deals. And, talks on more cooperation in civil and military technology transfer, and nuclear research.
India’s trade with Britain will also be affected if volatility hits the British currency, the pound. “Ever since Brexit was announced, the Centre has kept an eye on this; it might affect our export,” a senior official said. If the pound’s value falls, import by Britain would become more expensive and if the nation is unable to transfer that extra cost to consumers, what it buys will fall. British import from India fell for a third straight year till 2016-17. This has consequences for India, as the UK is India’s sixth-largest export destination, with $8.5 billion worth of our goods reaching there in FY17. On the other hand, import from the UK reduced by almost 30 per cent to $3.7 bn that year, giving India a comfortable trade surplus. Total bilateral trade in services is $7.2 billion.
The pound has since risen steadily against the dollar, since a more than 30-year low in June 2016. However, it is yet to recover its earlier position. In the long term, India’s export will be significantly affected, subject to the deals struck after Brexit, say trade watchers. “Indian apparel export will be heavily hurt; these were $1.6 billion in 2016-17, down from $1.8 billion earlier. These represented India’s largest export in value terms. If Britain gets the same treatment (from the EU after leaving) in terms of Free Tariff and Free Movement of Persons, not much will change for India,” said a senior functionary from the Federation of Indian Export Organisations. However, if Britain gets the treatment as applicable to a non-member country, it might lead to a positive impact on India’s export to both there and the EU, he added. As a result, the Free Trade Agreement Delhi is negotiating with the EU is now being done on a different template. The engagement with Brussels had been stuck after 16 rounds of discussion — both sides are yet to bridge gaps on key issues.
Modi’s five-day visit will, however, start with a two-day stop in Sweden; he attends the India-Nordic Summit. Prime Ministers from all the latter nations — Denmark, Finland, Iceland, Norway and Sweden — will attend. Modi is expected to focus on securing greater trade and investment with Sweden. India-Sweden annual bilateral trade is around $1.8 billion (Rs 117 bn). India’s trade with the Nordic countries totalled around $5.3 billion (Rs 346 billion) in 2016-17.