Disappointed but not unexpected, uncertainty will impact bilateral ties, global economy: Expert on UK crisis

With the resignation of British Prime Minister Liz Truss on Thursday, all eyes are now on the United Kingdom since it is reeling under the political instability and economic downturn. India’s former ambassador Ashok Sajjanhar told ETV Bharat's Chandrakala Choudhury that the economic policies she initiated were not suited to the present crisis and urged India to keep a close watch on upcoming developments.

New Delhi:With the resignation of British Prime Minister Liz Truss on Thursday, the whole world is staring at uncertainty and worried over the economic crisis-hit United Kingdom.

Spending just 45 days in office, Truss becomes the shortest-serving leader in British history, after her fiscal plans caused turmoil in markets. In humiliating circumstances, the conservative leader ended her tenure, saying, she can no longer deliver the mandate she was elected on last month. Speaking in Downing Street, the UK PM said she would stay on as prime minister until a successor is chosen to serve as Tory leader.

This has caused a chaotic situation across the UK as political instability looms large over the country. Now, the question is what’s next? Will Rishi Sunak take charge amid such political commotion in the country? What’s at stake for India-UK ties?

Talking about these developments, foreign policy expert and India’s former ambassador Ashok Sajjanhar said, “It is disappointing but not unexpected because during her campaigning, the sort of economic policies she proposed to deal with the economic challenges, could not have solved the issue. The UK is facing inflation which is the highest in 40 years. Therefore, this problem cannot be solved by increasing the money supply. There is a need to control the money supplies in the market and increase revenue. The policy that she followed under the previous Finance minister was totally ‘unsuited’ for the problems that the country is facing. It was expected that she will have to go but the fact she will have to step down within 45 days, came as a surprise”.

Ashok Sajjanhar has worked in diplomatic positions in Washington DC, Brussels, Moscow, Geneva, Tehran, Dhaka, and Bangkok. He negotiated for India in the Uruguay Round of Multilateral Trade Negotiations, for India-EU, India-ASEAN, and the India-Thailand Free Trade Agreement.

He opined that the United Kingdom is in turmoil and uncertainty, which is not good either bilaterally or for the global economy. The expert said Rishi Sunak, who was defeated by Liz Truss in the party campaign, does have a chance to come back. She defeated her rival by a nominal margin. “So the difference was not all that much. Now there has been a call for Rishi Sunak to come back. In fact, the Former Home Secretary Suella Braverman, who was sacked on October 19, may also contest for the PM post”, he added.

It is pertinent to note that other likely contenders are- Penny Mordaunt, Kemi Badenoch, and Tom Tugendhat.

When asked about India-UK ties, Sajjanhar underlined that India would like 'stability' and 'certainty' as far as the British leadership is concerned and hopes that there are no hiccups of this nature. Whoever comes into power in the UK, stability is very important and good for India’s bilateral relations with the country.”

Even Liz Truss was positively and strongly invested in getting FTA done before Diwali. Truss was moving in a direction of getting the Free trade agreement done as quickly as possible”, he added.

Meanwhile, UK’s former Home Secretary Suella Braverman criticized a deal with India, saying the agreement has not necessarily worked well. She went on to say that Indian migrants make up the largest number of visa overstayers in the UK

Commenting on what would happen to FTA between India and UK now that Truss has resigned, taking an optimistic stand, Sajjanhar said, “There is interest on both sides to have a good agreement because it is important for the UK since India is such a large market. It is the fifth-largest economy and is slated to become the third-largest economy by 2028. After Brexit, the UK needs a strong FTA with major powers. UK’s relationship with China is also deteriorating, the country does not have an FTA with the EU and the FTA with the US is nowhere in sight. Therefore, the UK has not much of a choice except to have a good agreement with India. It is also important for India as the UK is still an important economy”.

If there are safe and steady hands like that of Sunak or others who understand these issues well, there might be high inflation for the next 1-2 years but after that, it will be settled down to about 2% inflation. Having said that, the UK will still be the 6th largest economy in the world with a population of about 70 million, former amb explained.

Clearly, India needs to have a very close watch and continue to work with them irrespective of which leader comes into power, to further strengthen bilateral relations.

It may be recalled that right after Liz Truss took over as the British PM last month, she had a fruitful telephonic conversation with Prime Minister Narendra Modi. PM Modi congratulated PM Truss on assuming the office of the Prime Minister of the UK. He also appreciated her contributions to the India-UK bilateral relationship in her previous roles as Trade Secretary and Foreign Secretary.

Now all eyes are on the next PM, who needs to be chosen within a week. After Truss' resignation, the process has begun to find a new UK prime minister. While Rishi Sunak and Penny Mordaunt are the likely contenders, some reports suggest that Boris Johnson could also be in the PM's race.