UK in ‘difficult’ talks over greater access to India’s financial sector

UK negotiators have the “difficult” task of winning greater access to the Indian market for financial companies in a trade deal they hope to seal with New Delhi next month, the Lord Mayor of London has said.

Vincent Keaveny acknowledged in an interview with the Financial Times that India might reject British calls to ease its tight restrictions on foreign financial services firms.

The Lord Mayor is a largely ceremonial figure who heads the City of London Corporation, the local authority for London’s financial district, and lobbies for the UK financial services industry internationally.

“We’re hopeful that there’ll be a significant services component to the trade agreement. It’s clearly a difficult area from the negotiators’ point of view,” said Keaveny, who was briefed on the talks ahead of a visit to India last week.

Negotiators are working to finalise a deal in time for the Diwali festival on October 24, a deadline that Indian prime minister Narendra Modi and former UK prime minister Boris Johnson set earlier this year. Officials from both countries have since indicated that talks were on track.

“There would be some disappointment if we don’t get a significant services component,” said Keaveny, a partner in law firm DLA Piper’s finance practice. “It’s probably something that will be negotiated right up to the wire.”

Keaveny said that even if the trade deal did not meet the UK financial services industry’s hopes, it would still promote more Indian business for City firms. “The positivity that it will introduce to the relationship will flow through to the harder to address areas,” he added.

Among the UK’s demands is easier market access for British whisky, which incurs triple-digit tariffs in India.

City firms face a range of rules that they argue limit their ability to do business in India. Indian regulations for financial and professional firms include caps on how much equity foreign investors can hold, as well as requirements to operate as joint ventures. Foreign banks also face higher taxes than local ones, the City of London Corporation said.

New Delhi wants more UK visas for its skilled workers, along with greater access for Indian services and products such as pharmaceuticals.

Keaveny said UK firms would benefit from being able to hire more Indian students and professionals. “We, from the tech and financial services sector, have been pushing the [UK] government for some time now to ensure there’s greater mobility and greater talent,” he added.

Leaders from both countries see an early deal as a political boon. The UK’s new prime minister Liz Truss can present a deal with India as a pillar of her post-Brexit strategy to expand trade beyond Europe. It could also help boost confidence in Britain at a time when investors have dumped the pound and UK debt.

India, meanwhile, is pursuing several trade deals as part of a broader strategy that officials hope will diversify trade away from its geopolitical rival, China. New Delhi is in talks with Canada and the EU after signing deals with Australia and the United Arab Emirates this year.

Piyush Goyal, India’s commerce minister, told the FT in July that the country offered vast growth potential to investors. India “will probably grow 10 times in the next 30 years, as against the developed world which will probably be two times or three times 30 years from now”, he said.