India and the UK are still far from a free trade agreement – Sources

India and the UK have been struggling to make progress in free trade talks due to disagreements over some key tariff lines and investment protection rules, making a deal unlikely over the course of the year. Prime Minister Narendra Modi’s second term, which Indian sources said will end next year.

A government official familiar with the matter said the two countries were unable to agree concessions on India’s tariffs on imports of cars and alcohol.

Besides the tariffs, Britain is also pressing India to adopt strict investment protection provisions, either as part of the deal or as part of a parallel investment agreement, according to a second government official.

“Britain insisted on protecting investors if it were to strike a final deal,” said the person with direct knowledge of the negotiations.

The deal between India and the UK is crucial for New Delhi, which hopes to become a bigger exporter, while the UK will get wider access to whiskey, cars and high-end services.

The two countries want to double their bilateral trade by 2030 thanks to this agreement.

For India, an agreement with the UK will be the first to be concluded with a developed country after last year’s signing of an interim trade agreement with Australia. It comes at an opportune time for Modi, who is seeking to cement India’s business-friendly image ahead of national elections next year.

Meanwhile, the United Kingdom has prioritized an agreement with India as part of its Indo-Pacific foreign policy aimed at strengthening ties with fast-growing economies in the region.

The second official in the government directly involved said that the main dispute over investment protection provisions is Britain’s insistence that its companies be allowed to resort to international arbitration in the event of a dispute, without first resorting to Indian courts.

A third senior official said this would be a marked difference from the current ruling in India which requires companies to exhaust local remedies first, and the Indian government does not accept this.

“We kept November as another deadline. But it looks like it won’t work until next year at least. Maybe after the general elections in India,” a fourth official told Reuters.

Both countries are due to hold general elections next year, with Modi seeking a rare third term in office and British Prime Minister Rishi Sunak facing a severe test of his electoral popularity after a period of Tory rule.

By the end of April, states could not complete discussions on any more chapters than in December. They agreed on the terms of 13 of the 26 chapters that make up the agreement.

Two sources said the two countries also ruled out the possibility of an interim agreement.

All of the officials spoke to Reuters on condition of anonymity because trade deal negotiations are private.

India’s trade, finance and external affairs ministers did not respond to a request for comment.

A spokesman for Britain’s Department for Business and Trade said the two countries were “committed to working towards the best possible deal for both parties”.

“We are clear that we will only sign when we have an agreement that is fair, balanced and ultimately in the interest of the British people and economy,” the person said.

Mr Sunak’s approach, which favors quality over speed of the agreement, stands in contrast to that of Boris Johnson, who as prime minister set a Diwali deadline last October to seal the agreement. mandate of his successor, Liz Truss.