India has indicated to the UK that a free trade agreement (FTA) between the two countries can only happen only after Britain’s formal exit from the European Union (EU).

Finance Minister Arun Jaitley said that India is keen on investing in the UK and also welcomed British investment in India’s financial sector, but stressed that an FTA is far away.

“We will look at it (FTA), more trade arrangements and engagement between the two countries post the UK’s exit from the EU,” Jaitley said after the ninth UK-India Economic and Financial Dialogue.

Jaitley met with British Chancellor of the Exchequer Philip Hammond, who is on a two-day visit to India to participate in the Dialogue.

Hammond’s visit comes less than a week after British Prime Minister Theresa May triggered Article 50 of the Lisbon Treaty, formally initiating the process of Britain’s exit from the EU.

Clean-energy focus

At the Dialogue, both sides agreed to jointly set up a fund worth £240 million to finance clean energy projects in India.

The ‘Green Growth Equity Fund’ will be a sub-fund of the National Investment and Infrastructure Fund (NIIF).

Both governments reaffirmed their commitment to invest up to £120 million each in the fund with the goal of raising it to around £500 million.

“This is a relationship between equals. We share a common legal system and a common language of business. India is a major investor in the UK and the UK is one of the top investors here,” Hammond said.

The joint fund aims to leverage private sector investment from the City of London to finance India’s infrastructure projects, the statement said.

According to experts, the UK has no other alternative but to rely on India in order to address its skill shortage, the need for which will increase once it leaves the EU.

As a result, the UK will be compelled to ease some of the restrictions it has imposed on work permits.

“India has been one of the largest contributors of skilled labour, with doctors, scientists, engineers and IT specialists filling the vital market gap here and helping the country run,” said Sarosh Zaiwalla, Founder of UK-based solicitor Zaiwalla & Co.

“With a market of over a billion people, and as the fastest growing economy in the world, India holds pivotal importance for Britain to establish a bilateral trading agreement,” he added.

Hammond, who will be visiting Mumbai on Wednesday to attend the India-UK financial technology summit, has been accompanied by leaders from the UK’s FinTech and financial services firms, as well as FinTech envoy Eileen Burbidge, Commercial Secretary Baroness Neville-Rolfe and International Trade Minister Mark Garnier.

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