Turning Opportunity into Reality: How Indian Exporters Can Benefit from the India-UK FTA?

Introduction

The India-UK Free Trade Agreement is a big step forward for Indian exporters. With tariffs being reduced and market access improving, there is a real chance to grow in one of the world’s most developed and consumer driven economies. FTA is an opportunity to be capitalized on wisely. This article walks through how exporters can make the most of this agreement and turn policy on paper into reality on ground.

Understanding the FTA Provisions

The India-UK Free Trade Agreement aims to enhance trade by cutting down or completely removing tariffs and making it easier for goods and services to enter the market. This means that Indian exporters can sell a majority of their products in the UK with lower import duties, which helps them grow their global presence.

Under this agreement 99% of the India’s exports by value will now enter the UK duty free. For many categories, especially, labor intensive sector, the FTA creates a level playing field against the countries which were having the initial benefits such as Bangladesh and Vietnam. India can now compete with such countries and have a fair chance to gain market share.

For Indian exporters it is important to understand the FTA varies for different industries and products making it important for exporters to understand or consult to have a better understanding of the products they are looking to export so they can avail maximum benefit. While many products get full duty exemption, some goods for UK market are governed under a quota-based system. This means that:

• India is allowed to export only a fixed quantity of certain goods at lower or zero duty.

• Exports beyond that will attract higher tariffs.

The majority of the quota-based system has been applied to products in the agriculture and marine sectors, where UK also wants to protect its domestic producers.

FTA provisions for the major sectors are as follows:

• Textile and Apparels: Pre FTA the UK tariffs were 8-12% but post FTA provisions Zero duty on textile and apparels exported from India to UK.

• Auto Components: Pre FTA the UK tariffs were up to 18% but post-FTA provisions gradual tariff reduction leading to duty-free access over the next few years.

• Agri and Marine Sector: Pre FTA the UK tariffs were around 5-20% depending on the specific product (such as rice, prawns, fish and more) but post FTA provisions there has been quota-based reduction where some specific products will zero duty but while some might not.

• Leather and Footwear Sector: Pre FTA the UK tariffs were around 16% but post FTA tariffs will be eliminated but over a phased period.

Enhancing Products Standards and Compliance

After figuring out the first step on understanding the FTA provisions subject to the product one is looking for exporting, it is important to understand success in the UK market depends majorly on meeting its safety and ethical standards. These include rules related to quality, hygiene and sustainability. If Indian exporters want to expand and have access to UK market, it is important for them to align with these standards.

There are certain key areas of compliances:

• Certifications and Labels: Products must have necessary certifications like CE for machinery/electronics, BRC for food or HACCP for food safety and more.

• Traceability: For products which fall under agricultural and marine sectors, UK buyers require full traceability across the supply chain.

• Health and Safety: It ensures that certain banned elements are not included in the manufacturing process, animal welfare is maintained in marine product exports, adequate precaution measures being applied, information related to allergies and more.

• Sustainability: Realizing the importance of sustainability in developed markets it is important to ensure that products are environmentally friendly, cruelty free and ethically sourced.

Few of the compliances required for the major benefiting sectors are as follows:

• Textile and Apparels: UK retailers demand eco-labeling, transparency in sourcing to ensure no concerns like child labor and compliance with chemical regulations such as REACH. As mentioned, sustainability is one of the key factors that attract UK customers, so it is advised to get certifications like Global Organic Textile Standard.
• Auto Components: To export auto components to the UK it is necessary to ensure all the products meet the safety regulations which may require upgrading the product testing facility. Majority of UK importers work with companies who have IATF 16949 certification, which is a globally recognized automotive quality management standard.
• Agri and Marine Sector: The UK Food Standards Agency has strict controls on usage of pesticides, hygiene in seafood processing and animal health documentation. They are different certifications required depending on the products such as Export Health Certificate is generally required for Marine products.

Fostering Strategic Partnerships

While tariff reductions improve cost competitiveness, Indian exporters must think beyond cost and profits to succeed in UK such as having a long-term strategy. One of the strategies to ensure success and long-term sustainability is by building strategic partnerships in the UK market. The UK market is structured, brand sensitive and relationship driven. Having a partner with the local knowledge, networks and presence, gives you an edge to attract demand, ensure compliance and effectively manage the logistics. These strategic partnerships can accelerate the market entry and help gain market share.

There are different types of partnerships which Indian exporters can consider, a few are suggested below:

• Local Distributors or Agents: Appointing distributors or agents which are UK based can help the Indian exporters move their products effectively as they have a better understanding of market trends, buyer behavior and regulations. 
• Joint Ventures: To make the process smooth, Indian exporters can connect with a suitable partner in UK to co-develop products, R&D partnerships or joint manufacturing capabilities. This type of arrangement is especially suitable for sectors like Auto components and engineering.
• Private Labels and OEM: Exporters can find the right UK brands and become their original manufacturers. This strategy is prominent where buyers in the UK have exhibited high brand loyalty such as textiles, auto components and processed foods.

Strengthening Logistics and Leveraging Policy Support

A successful Free Trade Agreement requires more than tariff cuts, it requires proper strategy, strong logistics and policy backing. Indian exporters need to reduce delivery times, ensure reliability and tap into government schemes to lower costs and improve market access.

Key focus areas for strengthening logistics are:

• Cold Chain & Storage: For agri and marine exports, it is important to invest in cold chain systems, blast freezers and temperature-controlled transport. It will eventually help to meet UK hygiene and shelf-life expectations.
• Warehousing: Effectively utilizing Free Trade Warehousing Zones near Indian ports can help reduce custom delays, reduce costs and quicker turnarounds.
• UK-based Tie-ups and Shipping: Partnering and working with reliable logistics provider in the UK will ensure fewer delays and more transparency across the supply chain. It is especially in e-commerce and fashion sectors as it ensures smoother access to a wide network of channels

The Indian government offers several schemes to promote trade and help business to expand into global markets. It is important for exporters to be aware of these tools, in order to utilize them and take advantage of FTA. Few important support mechanisms are:

• RoDTEP Scheme (Remission of Duties and Taxes on Exported Products): Under this scheme, exporters can claim rebate on duties levied by central, state and local authorities such as electricity duties, port fees and more.
• Interest Equalization Scheme: The scheme offers subsidized credit for exporters, especially MSMEs and industries being labor intensive generating employment, eventually reducing working capital costs and improving competitiveness.
• Market Access Initiative Scheme: The scheme was created to support the marketing efforts for Indian exporters such as participation in trade fairs, brand promotions in UK and product testing for compliance with foreign standards.

Conclusion

The Free Trade Agreement between India and UK is not a guarantee for exporters but a platform to utilize and make the most of it. To gain out of it, they must combine strategy with actions by adapting the products for UK buyers, streamline logistics, form partnerships and utilize the policies to their support. With the proper planning and the right steps, exporters are not just preparing themselves for the UK market but also building a strong global presence.