Regulatory Mismatch In Services Sector Challenge For India-UK FTA

La Excellence IAS Academy

Regulatory Mismatch In Services Sector Challenge For India-UK FTA

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La Excellence IAS Academy | December 25, 2023 | International Relations



Syllabus: GS-II, International Relations

Source: Indian Express

Subject: Internal Security

Topic: Various Security Forces and Agencies and their Mandate

Issue: FTA with UK

Context: On the issue of movement of professionals, the official said that immigration debate and the ongoing FTA discussions in services are completely different things.

The negotiation challenges:

  1. Lack of regulatory alignment in the service sector:

Regulatory misalignment can include differences in standards, certifications, and industry-specific regulations, making it difficult for Indian service providers to seamlessly integrate with global markets.

  1. Resistance to foreign competition:
  • Resistance may stem from concerns about the potential impact on local industries, employment, and the fear of losing control over key sectors to international players.
  • Protectionist policies, which aim to shield domestic industries from foreign competition, can impede negotiations with global services leaders.
  1. Concerns about FDI regulations:
  • While both parties agree on the movement of business professionals, the service sector, which contributes over 50% to India’s GDP, faces hurdles due to outdated regulations and barriers on foreign direct investment (FDI).
  • sectors like retail and e-commerce, where restrictions may adversely impact market access negotiations in the FTA.

Possible Impact of Deal:

Signing deals in services can have a multiplier effect on economic activity.

Example :  legal services , opening the sector could offer employment opportunities for graduates and benefit Indian multinationals seeking legal services.

Way forward

  • Revamp of FDI regulations to align them with global norms and address concerns raised by trade partners.
  • Harmonize regulations with global standards for seamless integration.
  • Address local concerns through communication and emphasize benefits of global competition.
  • Balance protectionism with openness for foreign collaboration.
  • Review and reform protectionist policies to identify areas for liberalization.

Background of India-UK Free Trade Agreement.

  • In 2022, India and the UK had launched the formal FTA  negotiations. Until then, both countries are contemplating an interim free trade area, which will result in reducing tariffs on most of the items.
  • Both countries agreed to an early harvest scheme or a limited trade agreement to lower tariffs on a small set of goods apart from easing rules for select services.
  • Further, they agreed to avoid “sensitive issues” and focus on areas where there is more complementarity.
  • The agriculture and dairy sectors are considered sensitive sectors for India in trade talks.

Also, a target of doubling the trade between India and the United Kingdom (UK) by 2030 was also set.

Source: Indian Express

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