India-UK trade deal fraught with human rights risks across multiple sectors
by Jess Middleton and Reema Bhattacharya,
The 7th round of negotiations on a prospective free trade agreement (FTA) between the UK and India is set to take place in early 2023. Securing a deal with the world’s fifth largest economy is a major goal for Britain post-Brexit, and government ministers hope the FTA will inject as much as GBP3 billion into the UK economy by 2025.
However, conflicting priorities over immigration, automobiles, intellectual property rights for pharmaceutical products, and the alcohol industry have stalled bilateral talks, which began in January 2022. Though some of these issues might see an early resolution during negotiations this year, the UK's latest push for India to take up binding commitments on areas such as the environment, labour and sustainability will likely become an area of contention.
Indian authorities view the inclusion of stringent environment and labour obligations tantamount to erecting non-tariff barriers, which would leave the majority of Indian exports ineligible for benefits under the pact. However, their British counterparts fear the exclusion of such issues could expose the UK market to goods produced using modern slavery and child labour.
India is a signatory to several international human rights conventions and has local laws and regulations that aim to protect and respect human rights. However, most of these laws are rarely implemented across the country's vast and largely informal workforce.
Indeed, our Industry Risk Analytics dataset shows that India ranks among the worst performing countries for human rights abuses across a host of key industries.
Take Agricultural Products, where India stands out as the 16th highest risk country for modern slavery, and 18th highest risk for child labour. In the Apparel, Accessories and Footwear industry, India jumps to 7th highest risk for child labour, behind only North Korea, Bangladesh, Pakistan, Cambodia, Somalia and Papua New Guinea.
Figure 1: India ranks among the highest risk countries for child labour in key industries
The reputational and operational risks that this poses to businesses with global supply chains was demonstrated in December 2022, when police rescued nine children from a garment factory in Uttar Pradesh. In May 2021, leading British brands Tesco and Next featured among a list of companies linked to labour abuses involving migrant women in cotton spinning-mills in Tamil Nadu.
Recent legal developments have made it clear that a tightening global human rights due diligence regime is knocking on India's door. But Indian supply chains have a long way to go to adapt to this new reality of doing business with the world.
“In the coming years, we will see top Indian conglomerates in global value chains and foreign companies with an operational footprint in India being caught in the crosshairs of lax local regulations and mounting international scrutiny,” says Reema Bhattacharya, our Head of Asia Research.
“To evolve and be competitive in the future green economy, local and foreign businesses must adopt a holistic sustainability approach, going well beyond bare-minimum human rights obligations and more towards responsible business conduct tailored to fit individual business needs and operational realities."