UK Election Results 2024: Labour wins a majority, what this means for FTA negotiations with India

The UK Conservative Party, also referred to as the Tories, has been dealt with a crushing defeat in the country's general elections. The counting of votes is still underway, but the Opposition Labour Party has crossed the halfway-majority mark.

At 0400 hours GMT (09:30 am IST) on July 5, Labour's victory tally crossed 326 seats, which guarantees them a full majority in the 650-member House of Commons. The tally could rise further to 410-430 seats, as per the trends.

This will mark an end to the 14-year rule of Tories, and the tenure of nearly two years of Rishi Sunak, the UK's first Indian-origin prime minister. He took over the top constitutional office in October 2022, following an intra-party crisis. Sunak is expected to be replaced by Keir Starmer, the chief of the Labour Party.

For India, one of the key impacts to watch out for is the implication of the general election results on the India-UK Free Trade Agreement (FTA).

First, what is the India-UK FTA?

Following Brexit - which removed the UK from the European Union (EU) - London and New Delhi began exploring the possibility of a bilateral trade agreement. The talks formally began in January 2022.

The FTA aims to double India-UK bilateral trade to £40 billion by 2030. The pact could benefit India's textile, apparel and gems sector, according to New Delhi-based think-tank Observer Research Foundation (ORF).

Through the agreement, Britain seeks greater access to the duty-heavy Indian market. At present, items such as whiskies and automobile attract duties in the range of 100-150%.

The UK is also looking towards enhanced exports of its services to the Indian market. The services sector currently constitutes 80% of the British economy.

For India, one of the goals of the pact is greater mobility for Indian workers. The country seeks a new framework that allows its skilled professionals to find work in the UK.

Here's a look at what Labour's win could mean for the India-UK FTA negotiations:

Political stability

Labour is set to form the government with a brute majority, which provides policymakers on either sides with enough political legroom to negotiate the FTA.

The political turmoil in the UK -- with the country seeing three different prime ministers over the last two years -- has delayed the talks so far.

The negotiations were initiated by Boris Johnson, the then UK PM in January 2022, with the goal to seal the pact by "Diwali 2022". However, Johnson was replaced by his party colleague Liz Truss in September 2022, and the latter was swapped with Sunak within a couple of months.

Not only a Labour win brings more political certainty to the table, but the party has also transformed its views on India under the leadership of Starmer.

Labour Party chief Keir Starmer is expected to replace Rishi Sunak as the prime minister (File image)

Starmer's predecessor was Jeremy Corbyn, who, under his tenure as the Labour chief, called for international intervention in Kashmir in 2019. He was also accused of sympathising with Sikh separatist elements.

However, Starmer cracked down on anti-India voices within the Labour after taking charge, and recently said that he is confident that the party has been cleansed from members who hold “extremist views” on India.

Notably, Corbyn is no longer a member of the Labour. He was removed from the party in 2020, after being levelled with accusations of anti-Semitism.

Immigration still a concern?

The Tories were known for their tough anti-immigration views, and were said to be unlikely to accept New Delhi's call for greater mobility for Indian workers under an FTA.

"A Labour government may be better placed to make concessions on mobility-related issues," according to ORF, which has been involved in track II diplomacy.

However, an easier visa regime for Indian professionals may still remain a sticking point, say some Indian analysts, as there is a bipartisan view in the UK that immigration needs to be curbed.

"Labour and Tories differ on their approach towards tackling immigration. But both the parties, as well as the general populace of the UK, want immigration to be strictly curbed," Sourish Ghosh, a Kolkata-based researcher on international affairs, commented.

Carbon tax likely bone of contention

The UK, which has set a target of becoming net zero in terms of carbon emissions by 2030, seeks to impose a Carbon Border Adjustment Mechanism (CBAM) tax on imported goods, on lines of the same imposed by the EU.

During the negotiations so far, India has reportedly sought a relief from carbon tax under the FTA, as it would adversely affect the country's exporters.

The Labour is considered to be more committed towards the cause of climate change as compared to the Tories, which may hinder New Delhi's chances of claiming an exemption from carbon tax, experts said.

While the rate of carbon tax being mulled has not been disclosed, it could be in the range of 20-35%, think-tank Global Trade Research Initiative (GTRI) said in a report released last year.

“The FTA’s sustainability aspect, notably its potential impact on India’s garment industry, holds particular significance, as it could lead to non-tariff barriers aimed at promoting sustainability. Moreover, India must consider the potential introduction of a CBAM by the UK and address this in the FTA’s provisions,” the report said.