LABOR PARTY’S WIN AND ITS IMPACT ON INDIA

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In the United Kingdom, the Labor Party won the elections on the 4th of July 2024. The win of the Labor Party after 14 years marks the governance of the United Kingdom shifting from a right-wing government to the centre and now finally to a left leaning administration. The Labor party, led by Keir Starmer moved towards the centre, making them a less daunting choice for traditional conservative voters dissatisfied with the Conservatives’ handling of economic and social issues. UK’s Labor Party, founded in 1900, is a political party aligned with leftwing principles. It advocates for social justice, “workers’’ rights, and public welfare. Known for its strong association with trade unions, the party has historically sought to represent the interests of the working class. This political transition not only reshapes the domestic policies of the UK, but also paves the way for new international collaborations.

In 2024, a landmark agreement was reached between India and the UK, aiming to enhance bilateral trade and investment. Through this collaboration, both nations aim to address pressing economic challenges and harness opportunities in various sectors. Previously, Jeremy Bernard Corbyn, who led the Labor Party, commented on the action taken by India when the government revoked the special rights of Jammu and Kashmir under Article 370 of the Indian Constitution in 2019.Corbyn believed that it is the people of Jammu and Kashmir who need to take the decision of what happens to them and not the central government. The ruling party in India, at that time the BJP, had a contradictory view to that of Corbyn’s, causing a rift between the two countries and subsequently altering the perspective through which they view each other. However, Keir Starmer, leader of the Labor Party, has a similar view as that of the BJP on most issues, which would enable better coordinated, diplomatic decisions such as the Free Trade Agreement (FTA) Policy, Carbon Tax amendments, Technological Collaboration and healthcare. The Free Trade Agreement, which includes 26 chapters including goods, services, investments, and intellectual property rights have led to 14 rounds of talks.

The Indian industry is demanding greater access for its skilled professionals from sectors like IT and healthcare in the UK market, besides market access for several goods at nil customs duty. On the other hand, the UK is seeking a significant cut in import duties on goods such as scotch whisky, electric vehicles, lamb meat, chocolates, and certain confectionary items. Britain is also looking for more opportunities for UK services in Indian markets in segments like telecommunications, legal and financial services (banking and insurance). According to the think tank Global Trade Research Initiative (GTRI), the agreement is nearly finalised and with a few minor adjustments like curtailing the number of visas for Indian professionals, the Labour Party is likely to give its approval. It has suggested that India should focus on two issues - Carbon Border Adjustment Measure (CBAM) and non-traditional subjects like labour, environment, gender, and intellectual property rights in the pact. The UK’s Carbon Border Adjustment Mechanism and its collaboration with India are pivotal components of contemporary trade and environmental policies. The CBAM aims to impose levies on imports from other countries with lower or no carbon pricing, essentially to prevent carbon leakage and to ensure a level playing field for domestic products subject

to strict carbon regulations. The UK Government has announced that goods imported into the UK from countries with a lower or no carbon price will have to pay a levy by 2027. The sectors identified in the government's announcement are iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement. The UK CBAM will apply to Scope 1 emissions (direct emissions from activities owned/controlled by an organisation), Scope 2 emissions (indirect emissions from the organisation’s consumption of electricity, heat, steam, and cooling purchased as an input) and select precursor product emissions. This is stated to “ensure comparable coverage with the UK Emissions Trading Scheme.” The imposition of the CBAM will thus affect a significant share of India’s exports to the European Union, and Indian goods will run the risk of becoming less competitive in the EU market due to the financial and administrative burden imposed by the CBAM. In fact, the UNCTAD forecasts that India will lose USD 1-1.7 billion in exports of energy-intensive products such as steel and aluminium. This is in line with the general estimates provided by the Boston Consulting Group that a levy of USD 30 per metric tonne of CO2 emissions could reduce profits for foreign producers by about 20%. As noted above, the Proposed Regulation envisages that foreign countries can be exempted from the CBAM, provided certain conditions are met. India has introduced various schemes such as Perform, Achieve and Trade (PAT), Renewable Purchase Obligations (RPO), a tax (a cess) on coal production and Gujarat Air Pollution Cap and Trade Program, that have been considered as applying an implicit price on carbon. In 2019, India also briefly discussed introducing a carbon pricing instrument, in line with the EU ETS, in the Micro, Small and Medium Enterprises (MSME) sector. The CBAM agreement also states that the Proposed Regulation will apply starting from 1 January 2023. During the initial phase (2023-2025), there will be no obligation to pay for embedded emissions. During this transitional period, however, both direct and indirect emissions embedded in the imported CBAM goods will need to be monitored and reported on a quarterly basis. From January 2026, the CBAM is expected to apply in full, including the obligation to purchase CBAM certificates. The CBAM policy will improve international terms between both the countries and will provide potential for introduction to new reforms which will help solve crucial problems. Under the FTA, the countries have spoken about the migration policy. The UK and India have signed an agreement aimed at supporting people to live and work in both countries while addressing the long-standing problems of illegal migration from India to the UK. Under this, the two countries will cooperate around removing unauthorised migrants in the UK in exchange for visas for temporary migration to the UK. As a result of the deal, there will be easier access to UK visas for young Indian citizens to work for up to two years & young Britons will be able to do the same in India. Employers should keep an eye out for updates in the future as it is likely businesses will receive applications from those who may be eligible for this UK visa. These deals will also enhance and accelerate the processes to return Indian nationals with no legal right to stay in the UK. Therefore, it is likely there will be more action being taken by the Home Office to tackle illegal working and organised immigration crime. The countries spoke about defence policies, stating that UK and India would work together in a strategic partnership to tackle “cyber, space, crime and terrorist threats and develop a free, open and secure Indo-Pacific

region”. The two countries’ shared interests would underpin increased cooperation in multilateral fora to “build understanding among diverse partners on international security and help set global rules for cyber security and space taking into account their respective interests”. This policy will deal or ensure the success of the 2030 roadmap which the two countries aim for. In conclusion, the win of the Labor Party will have its own positive and negative effects on India, which will be seen in the coming years as both the countries keep discussing foreign policy and ensure to remain on the same ground and have a neutral stance.