The recent phone call between the leaders of two democracies – PM Modi and PM Johnson has started fresh buzz regarding the possibility of re-energized bilateral relations between India and the United Kingdom. India has invited UK Prime Minister Boris Johnson as the Chief Guest of the Republic Day, which Johnson accepted. PM Modi invited him via a phone call on 27 November. India has taken this step at a time when the Brexit is very close and the dispute between the EU and the UK is still escalating. This essentially means that India has prioritized its relations with London among the EU and the UK.
Indeed, given India’s vast market, easing business environment, cheaper labour and presence of ever-increasing middle-class consumers, both the EU and the UK want to improve their relations in the future and culminate these relations into a possible Free Trade Agreement. But India has now signalled at prioritizing United Kingdom due to the EU’s close proximity with China among other reasons.
There are no two opinions about whether Brexit is going to happen, but whether it will be a hard Brexit or soft Brexit is yet undecided. But with the dispute raging between Brussels and London, it seems that the possibility of a soft Brexit is less and that it will be a no-deal Brexit. The UK and the European Union have said that there are serious differences over the post-Brexit trade deal and Britain’s negotiator Lord David Frost said that despite progress, “broad differences” in some areas still remain.
Not only this, but the division of water is also among the many differences between the two and the issue remains as to how many European boats can go fishing in the British waters next year. This is an issue which the Boris Johnson administration cannot relent, as the safeguarding of fishing rights exclusively for their people was the pitch, the very reason why traditionally the Labours have voted for the Conservatives. At the same time, the matter is also stuck on the need for a mechanism of settlement on future differences and establishment of an institution for addressing them.
Hard Brexit meant a no-deal Brexit, in which the UK would relinquish membership of the EU’s single market and gain full control of its own legislation and immigration. However, in the event of a “hard Brexit”, the UK’s currency pound is predicted to fall to its lowest level and the UK will need a market, large enough to act as a cushion to absorb its exports, thus balancing the impact on Pond.
Currently, the UK shares more than 44 per cent of its exports with the EU countries and it needs a trading partner that can provide a market of equal or greater size. Being a single market will force London to expand elsewhere into markets, and for the very reason, the UK can fall back on the Commonwealth countries of which India is a part and seems to be the most lucrative option.
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The situation will also be similar for the EU and in the event of the UK’s separation, it will need a country that can fit the role of UK and fill the space that the break will create. For both of these reasons, India appears to be the best choice for both the EU and the UK.
But India is not showing any kind of interest to give a new boost to its relations with the EU, and until recently the EU was the one that remained too selective. During the recent 15th India-European Union Summit, there was no talk of any free trade deal. A free trade deal between India and the European Union has been pending since 2007 and even after the latest virtual summit no official deadline for this free trade agreement was announced. This means India wants to keep trade with the EU limited to an extent till Brussels follows suit.
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There are three reasons for this, the first being the EU’s deep trade relations with China. Secondly, the continued support of the EU de facto leader Angela Merkel to China and thirdly, China’s growing influence in the EU through the ‘17+1’ dialogue. China has been spreading its BRI through the ‘17+1’ across Europe and India has been perennially critical of the initiative.
On one hand, there is no showing interest in further enhancing trade relations with the EU and on the other, the continued growth of relations with the UK shows where India’s interests lie. And the recent developments suggest that both India and the UK want to increase their mutual cooperation while rejecting the EU.