Rishi Sunak: UK’s first Indian-origin PM

In News

• Recently, the Indian-origin and country’s former Chancellor Rishi Sunak has been elected as the next Prime Minister in the UK. 
  • He is also the UK’s first prime minister of Indian origin. 

About the current crisis in UK 

• Britain is facing a triple whammy of:
  • Slowing growth
  • High inflation triggered by spiralling energy prices in the wake of the Ukraine war 
  • Budget shortfall that has eroded its financial credibility internationally.   

India-UK ties 

• Political
  • UK-India relationship is rooted in India’s colonial history with the British.
  • The UK supports India’s proposal for permanent membership of the UNSC and is also an important interlocutor for India on global platforms.
• Geopolitics
  • The Indo-UK Free Trade Agreement will remain on course, and the deepening of the bilateral defense cooperation will continue to meet the challenges of a rising China.
• Defence
  • Ajeya Warrior (army-to-army biennial exercise), the Konakan (joint navy-to-navy annual exercise) and the Indradhanush (joint air-to-air exercise) happen between India and UK.
• Free trade agreement 
  • Both countries formally launched talks for a free trade agreement. It has been delayed due to issues such as migration. 
    • In such pacts, two countries either eliminate or significantly reduce customs duties on the maximum number of goods traded between them, besides easing norms for promoting investments and services trade. 
  • The countries have missed the Diwali deadline for concluding the negotiations because of political developments in the UK.
    • Political stability in the UK now would help fast-track the negotiations for the pact, which would give a boost to the bilateral trade and investments between the countries.
• Bilateral Trade and foreign direct investment 
  • The UK is also a key investor in India. India attracted foreign direct investment of USD 1.64 billion in 2021-22. The figure was about USD 32 billion between April 2000 and March 2022.
  • India’s main exports to the UK include ready-made garments and textiles, gems and jewellery, engineering goods, petroleum and petrochemical products, transport equipment and parts, spices, metal products, machinery and instruments, pharma and marine items.
  • Major imports include precious and semi-precious stones, ores and metal scraps, engineering goods, professional instruments, non-ferrous metals, chemicals and machinery.
• Service Sector 
  • Services make up around 70 per cent of annual trade between our countries. 
  • In the services sector, the UK is one of the largest markets in Europe for Indian IT services. 
  • The bilateral trade increased to USD 17.5 billion in 2021-22 compared to USD 13.2 billion in 2020-21. 
  • India’s exports stood at USD 10.5 billion in 2021-22, while imports were USD 7 billion. 
• Indian Diaspora 
  • As far as Indian-origin people in the UK are concerned, numbering 1.4 million, they account for 2.5 percent of the overall British population.

Importance of India-UK Relation

• Regional balance: 
  • Britain is tilting to the Indo-Pacific, where India is a natural ally. India, which is looking at a neighbourhood that has been transformed by the rise of China, needs as wide a coalition as possible to restore regional balance.
• Trade, Investment & Jobs: 
  • India-UK trade was worth £23 billion in 2019, and both countries want to double the figure by 2030. Almost half a million jobs are supported across India and the UK through investments in each other’s economies.
• Market for British goods: 
  • A free trade deal of the UK with India – the world’s largest democracy, fifth biggest economy, a nation of 1.4 billion people will create a huge market for British goods like whisky, cars and services.
• Benefits for Businesses:
  •  A trade deal with India will break down barriers and make it easier for British businesses to secure more investments, higher wages and lower prices in Britain.
• Better productivity:
  • The FTA with the UK is expected to provide certainty, predictability and transparency and will create a more liberal, facilitative and competitive services regime.
• Export:
  • FTA negotiations with the UK are expected to increase our exports in Leather, Textile, and Jewellery and processed Agri products. 
  • India is also expected to register a quantum jump in the export of Marine Products through the recognition of 56 marine units of India.
• Skilled Labour Access: 
  • India will be looking for concessions on Indian skilled labour accessing UK markets.
• Defence Strengths: 
  • Britain could also contribute to the strengthening of India’s domestic defence industrial base. The two sides could also expand India’s regional reach through sharing of logistical facilities.
• Democracy and diaspora:
  • Both India and the UK are vibrant democracies, with a partnership built on shared history and rich culture. 
  • The diverse Indian diaspora in the UK, who act as a “Living Bridge”, adds further dynamism to the relations between the two countries.

Concerns in India-UK Relation 

• Bitter Past: 
  • The bitter legacies of the Partition, anti-colonial resentment and Britain’s prejudices and its perceived tilt to Pakistan have long complicated the engagement between India and the UK.
• Political Negativity: 
  • While there is no way of fully separating South Asian and British domestic politics, India’s problems have been accentuated by the British Labour Party’s growing political negativity towards India.
• WTO related issues: 
  • Interim FTA that do not convert into full FTAs can also face challenges from other countries at the World Trade Organisation(WTO) because the latter only permits for the preferential treatment between countries which have bilateral agreements between them.
• Domestic Politics: 
  • The large South Asian diaspora in the UK transmits the internal and intra-regional conflicts in the subcontinent into Britain’s domestic politics.
• Engagement with EU: 
  • The UK needs to sort out its own internal deliberations on the future of its trajectory with the EU.

Way forward

• He might raise tax rates and make spending cuts that will be unpopular and may have unforeseen political consequences.
• It now appears increasingly likely that the FTA will be signed only sometime in 2023. 

Source: TH