UK CALLING TN: FTA OPPORTUNITY

What does Tamil Nadu stand to gain from the recently announced free trade agreement with the UK? Quite a lot. It offers the state the "opportunity to expand its global industrial footprint across sectors where it already holds a competitive edge," says state industries minister TRB Rajaa. That's because the sectors that the FTA will positively impact include auto components, textiles, leather, and footwear – all of which are critical industries in TN's manufacturing and export basket. Says industry secretary V Arun Roy: "The UK FTA is a big positive for TN. In textiles, it makes our exports to Britain more competitive, and they are expected to more than double. The leather and footwear industry will also witness an export surge. Another beneficiary of more business and job creation will be our well-developed auto component industry."Auto components form the largest chunk of TN's nearly $117 billion (FY24-25) engineering export ecosystem. According to Shradha Suri Marwah, president, ACMA, the FTA will benefit the component sector through better "export opportunities in areas such as electric mobility, precision engineering, and lightweight materials." Rajaa is unequivocal about how big the potential can be. "In the auto and auto components, the tariff reduction from over 100% to just 10% creates massive upside," he says. "Tamil Nadu's globally connected auto industry, which includes companies like Tata Motors (through Jaguar Land Rover) and TVS Motor Company (which owns Norton), can now seamlessly integrate their UK and Indian operations, scaling faster and creating more high-value jobs here in the state," he adds.State-headquartered auto giants are chuffed about this chance to tap the global market via the UK. Says Arun Roy, "The automobile industry with UK operations like Tata-JLR and TVS can use this low tariff opportunity to closely integrate their TN operations with their global supply chain." TVS Motor MD Sudarshan Venu greeted the FTA for opening up "new frontiers for Indian companies to take ‘Make in India' to the world". The company, which is preparing to launch its British brand Norton's vehicles this year, "will benefit from the strengthening of trade links between India and the UK," he adds.For TN companies with a presence in the UK, the FTA will be a "strategic enabler", says R Dinesh, chairman, TVS Supply Chain Solutions. "As a company with a presence in both India and the UK, (the FTA) will accelerate our ability to deliver cost-effective solutions to global customers." And where the companies go, skills follow. "The state is also a leader in creating qualified professionals in the service sector. These professionals will get more job opportunities in the UK," says Arun Roy.Regarding exports, Tamil Nadu's current strength lies in passenger vehicles (PVs), auto components, and tyres. But, it is now eyeing segments like electric drivetrains and engine management systems to "diversify its portfolio," said state MSME secretary Atul Anand in an earlier interview. The Tamil Nadu Industrial Policy 2021 and EV Policy 2023 incentivize investments in EVs and electronics manufacturing as part of the state's focus on high-value components. The state faces competition from global manufacturing hubs, such as China and South Korea, which have established dominance in EV components. The FTA will be a clear advantage on that front. Given that MSMEs "form the backbone of the auto component industry, they stand to gain from the liberalized terms of trade and improved access to UK markets," adds Marwah.The agreement will be critical for TN's other industries, such as textiles, where TN clocked $8 billion worth of exports last fiscal. "In textiles, the deal is expected to more than double exports from hubs like Tirupur to the UK, making our high-quality knitwear even more attractive in European markets," says Minister TRB Rajaa. The industry seems to concur. According to Dr A Sakthivel, vice chairman of the Apparel Export Promotion Council, the FTA will allow exporters to enjoy a stronger edge over the competition from Bangladesh, Vietnam, and China in the UK market.The same goes for footwear and leather, where Tamil Nadu makes up for nearly 40% of India's output. "The reduction in UK tariffs will boost both traditional leather goods and our fast-growing non-leather manufacturing clusters," Rajaa adds. J Rafiq Ahmed, chairman of Kothari Industrial Corporation, believes that the FTA "will make it cheaper to export labour-intensive goods". Given that the UK is India's third-largest trading partner as far leather and leather products are concerned and TN clocked $1.63 billion in leather exports in FY24-25, the zero duty deal is important for the state's exporters. With inputs from Vaitheeswaran B