La Excellence IAS Academy

Regulatory Mismatch In Services Sector Challenge For India-UK FTA

Syllabus: GS-II, International Relations

Source: Indian Express

Subject: Internal Security

Topic: Various Security Forces and Agencies and their Mandate

Issue: FTA with UK

Context: On the issue of movement of professionals, the official said that immigration debate and the ongoing FTA discussions in services are completely different things.

The negotiation challenges:

  1. Lack of regulatory alignment in the service sector:

Regulatory misalignment can include differences in standards, certifications, and industry-specific regulations, making it difficult for Indian service providers to seamlessly integrate with global markets.

  1. Resistance to foreign competition:
  • Resistance may stem from concerns about the potential impact on local industries, employment, and the fear of losing control over key sectors to international players.
  • Protectionist policies, which aim to shield domestic industries from foreign competition, can impede negotiations with global services leaders.
  1. Concerns about FDI regulations:
  • While both parties agree on the movement of business professionals, the service sector, which contributes over 50% to India’s GDP, faces hurdles due to outdated regulations and barriers on foreign direct investment (FDI).
  • sectors like retail and e-commerce, where restrictions may adversely impact market access negotiations in the FTA.

Possible Impact of Deal:

Signing deals in services can have a multiplier effect on economic activity.

Example :  legal services , opening the sector could offer employment opportunities for graduates and benefit Indian multinationals seeking legal services.

Way forward

  • Revamp of FDI regulations to align them with global norms and address concerns raised by trade partners.
  • Harmonize regulations with global standards for seamless integration.
  • Address local concerns through communication and emphasize benefits of global competition.
  • Balance protectionism with openness for foreign collaboration.
  • Review and reform protectionist policies to identify areas for liberalization.

Background of India-UK Free Trade Agreement.

  • In 2022, India and the UK had launched the formal FTA  negotiations. Until then, both countries are contemplating an interim free trade area, which will result in reducing tariffs on most of the items.
  • Both countries agreed to an early harvest scheme or a limited trade agreement to lower tariffs on a small set of goods apart from easing rules for select services.
  • Further, they agreed to avoid “sensitive issues” and focus on areas where there is more complementarity.
  • The agriculture and dairy sectors are considered sensitive sectors for India in trade talks.

Also, a target of doubling the trade between India and the United Kingdom (UK) by 2030 was also set.

Source: Indian Express

Centre Plans To Revive Tax Cuts On Sugar Exports

Syllabus:  GS-III, Indian Economy;

Subject: Indian Economy;

Topic: Issues relating to planning, mobilization, of resources, growth, development and employment.)

Issue: Reviving Tax Cuts on Sugar Exports.

Context: Sugar industry has appealed to Food Department to change shipments back to the ‘free’ category from ‘restricted’; plans also in the works to enhance existing tax cut rates for export of tea


The Union government is exploring ways to reinstate tax remission benefits for sugar exports, previously placed in the ‘restricted’ category in mid-2022. Additionally, there are considerations to address the demands of tea exporters by potentially enhancing existing tax remission rates.

Remission of Duties and Taxes on Export Products (RoDTEP) Scheme:

  • Launched in January 2021 to prevent the addition of domestic taxes on goods meant for export.
  • Sugar exporters lost RoDTEP benefits when sugar was moved to the ‘restricted’ category in June 2022 to boost domestic availability and curb price increases.

Current Situation:

  • Items in the ‘restricted’ category are ineligible for RoDTEP benefits.
  • Sugar industry appeals to change the restriction on sugar and return it to the ‘free’ category, subject to certain conditions.

Legal Perspective:

  • The Gujarat High Court suggests that export permissions granted for sugar shipments should be eligible for RoDTEP benefits.
  • Calls for potential creation of a new export category beyond ‘free’ and ‘restricted’ to accommodate exports under specific conditions.

Tea Export Considerations:

  • The Commerce Ministry is reviewing RoDTEP rates for tea exports, especially high-quality tea.
  • Industry request for rate enhancement being considered, with data submitted by the Indian Tea Association forwarded to the official panel for review.

Conclusion: The government aims to address the concerns of the sugar industry and tea exporters by potentially modifying export categories and RoDTEP rates. The outcome will impact the competitiveness and benefits for these sectors in the global market.

Background :

The sugar industry is a vital agro-based sector with a significant impact on rural livelihoods, involving around 50 million sugarcane farmers and approximately 5 lakh workers directly employed in sugar mills.

  • India – world’s largest producer and consumer of sugar.
  • World’s second-largest exporter of sugar.
  • The sugar industry is geographically distributed across two major production areas:
    • North: Uttar Pradesh, Bihar, Haryana, and Punjab.
    • South: Maharashtra, Karnataka, Tamil Nadu, and Andhra Pradesh.
  • South India’s tropical climate favors higher sucrose content, leading to increased yield per unit area compared to the north.

Optimal Growth Conditions:

  • Temperature: 21-27°C with a hot and humid climate.
  • Rainfall: Approximately 75-100 cm.
  • Soil Type: Deep, rich loamy soil.

Sugar Exports Status:

Current Scenario (2021-22):

  • Out of India’s total sugar exports of 110 lakh tones in 2021-22:
    • Raw sugar accounted for 56.29 lakh tones.
  • Major importers of Indian raw sugar include Indonesia, Bangladesh, Saudi Arabia, Iraq, and Malaysia.

Source: The Hindu