India and the UK have reaffirmed their intention to strengthen bilateral relations, with emphasis on speeding up negotiations for a Free Trade Agreement (FTA) and Bilateral Investment Treaty (BIT). The joint statement followed the successful completion of the 13th Economic and Financial Dialogue in London, co-chaired by Union Finance Minister Nirmala Sitharaman and the UK Chancellor of the Exchequer Rachel Reeves.
This strategic dialogue is designed to cement the economic relationship between the two countries with both countries looking forward to the future of investment and trade. One of the major achievements of the dialogue was the agreement to accelerate the ongoing negotiations for the FTA, which has the potential to open new channels of trade and investment. Both nations also agreed to enhance the BIT, which will further improve bilateral investment.
Key Deliverables: Intensification of Strategic Segments
The UK also referred to its upcoming Industrial Strategy, where it highlighted industry sectors such as advanced manufacturing, life sciences, clean energy, and defence, where partnership with India would fuel economic growth. The UK’s excellence in these areas is likely to enhance India’s rise as an emerging manufacturing base globally. Both sides evinced interest in intensification of partnership in financial services, professional services, and creative industries with high growth rates.
The two countries also talked about the forthcoming signing of the India-UK Defence Industrial Roadmap that will establish connections between their industrial bases and enhance the robustness of supply chains. This is likely to be a major driver of enhancing defence relations between the UK and India dating back very long ago.
Financial Cooperation and Market Expansion
The UK-India dialogue on financial services has gained momentum in recent years and both countries have agreed to take it forward. Of the highlights is the deepening of financial markets, the example of the Financial Markets Dialogue (FMD) in India’s GIFT City in December 2024. The next FMD in London this year will give even greater opportunities to further strengthen cooperation in the fields of banking, insurance, pensions, capital markets, and green finance.
The UK has also welcomed the move by India to permit overseas investments by insurance firms in GIFT IFSC, and talks on pension firms following suit. Both countries are keen to explore the potential of the UK bond markets in mobilizing capital for Indian corporates through rupee-denominated Masala Bonds.
Global Financial Cooperation: The Internationalisation of the Indian Rupee
Among the most significant emphasis points of the discussion was that which was paid to the internationalisation of the Indian rupee. The UK welcomed India’s move to arrange for rupee accounts to be opened in a foreign jurisdiction. Both countries acknowledged that they would consider how London, being a global financial centre, could make this process possible and facilitate the international dispersal of India’s currency.
Both countries also committed to collaborate on transition finance, mobilizing capital for sustainable development. The UK Transition Finance Market Review was cited as a key driver for guaranteeing long-term economic resilience and boosting investment.
A Strong Bilateral Trade Future
The Economic and Financial Dialogue emphasizes the superb economic ties between India and the UK, with two-way trade of over £40 billion and significant foreign direct investment holdings in both directions. Both countries commemorated their first-rate partnership and mutual pledge towards enabling sustainable growth and prosperity in both economies.
India and the UK both wish to have a strong policy framework to enable infrastructure funding, green investment, and trade cooperation to fuel economic growth over the next few years.
