UK India Business Council (UKIBC), an advocacy group that works with businesses and governments in the UK and India with an objective to strengthen bilateral trade and investment ties, is hoping for great synergy between the two countries in the upcoming virtual meeting of Prime Minister Narendra Modi and his UK counterpart Boris Johnson.
In an exclusive interview, UKIBC CEO Jayant Krishna explains why a mega trade deal is on the anvil.
Excerpts from the interview:
Q: In the post-Brexit world and amid the ongoing Coronavirus pandemic, where major economies are increasingly trying to be self-reliant (Aatmanirbhar) for basics, how do you envisage the UK and India strengthening their bilateral trade?
A: We believe that international cooperation remains crucial for any country to have global business footprints. It is pragmatic to be self-reliant in certain essential products and services, but no country can grow to maximum effect by keeping its economy isolated from the rest of the world. India, like all countries, needs international support and collaboration to leverage strengths from across the world, including the UK.
The Government of India clearly agrees to this logic as concurrently it is shaping the country’s self-reliant goals while the bilateral relationship has gone from strength to strength in recent years with more engagement and greater enthusiasm from Ministers than in recent history. So, far from being a protectionist step, we believe that Aatmanirbhar Bharat can boost India’s integration and leadership in global supply chains and strengthen the bilateral UK-India relationship.
In fact, the UKIBC’s own ‘Doing Business in India’ survey found that the majority (77 per cent) of UK companies surveyed think that Aatmanirbhar is an opportunity for more business with India.
On the other hand, India is really an important part of the UK’s post-Brexit world. In the last 12 months alone, the UK’s Secretary of State for International Trade, Liz Truss, has met with her counterpart, India’s Minister for Commerce & Industry Piyush Goyal, several times. The ensuing Enhanced Trade Partnership and 10-year roadmap are important stepping stones on the way to a stronger bilateral relationship and eventually a free trade agreement. Our areas of mutual interest include commerce, investments, health, education, and sustainability and we expect the bilateral relationship to strengthen dramatically in this decade.
Q: Even as UK PM Boris Johnson has cancelled his trip to India, there are reports that large bilateral trade deals are in the pipeline. Do you have any idea what the deals would look like?
A: Like everyone else, we will have to wait for the full details until Prime Ministers Johnson and Modi meet virtually. However, our interactions with businesses as well as both governments suggest that the agreement will cover all aspects of trade and investment. The Enhanced Trade Partnership was announced earlier by Liz Truss and Piyush Goyal, covering several sectors, and the expected 10-year road map will complement the trade and investment partnership as we also work together on areas of shared responsibility like climate change, sustainability, healthcare, and education.
Q: Which sectors and areas do you think can the two countries have an agreement over?
A: Several sectors were highlighted for focus at the Joint Economic and Trade Committee of July 2020 (where the Enhanced Trade Partnership was announced), in which the UK India Business Council serves as UK secretariat. They include food and drink, ICT, life science and healthcare, chemicals and services.
I think manufacturing is a key area, as both countries have notable strengths, the UK in innovation, technology and R&D in particular, and India in its sheer manufacturing capability and cost arbitrage. British technologies could be leveraged to manufacture in India for domestic and export markets. UK like JCB, Rolls-Royce, BAE Systems, Diageo, GSK, Perkins and many others are shining examples of this.
Success of banks like HSBC and Standard Chartered in India and the increase in FDI limit for the insurance sector to 74 percent throws opportunities for the BSFI sector. Good experience of firms like PwC signals opportunities in India for assurance, advisory and tax services. De La Rue is keen to invest in the production of high security features enabled currency notes in India, including polymer substrate ones, which are greener, cleaner and safer.
UK’s defence capabilities are well-renowned, and India stands to gain from them in an increasingly uncertain world order. In 2020, India raised the FDI cap from 49% to 74% through the automatic route which is an opportunity to be leveraged by UK firms.
Recent acquisitions in the UK of sporting motorcycle Norton by TVS and two-wheeler firm Classic Legends by Mahindra & Mahindra are indeed interesting developments. Essar is investing in an ambitious hydrogen project in the UK. Large investors like Tata are expanding in the UK. These examples augur well for more UK investments in India.
Q: What are the prospects of Indian businesses in the UK and British investments in India?
A: India is already the second largest investor into the UK, behind only the US. The UK has been the second fastest growing G20 investor into India in the last decade.
By making more investments, businesses in both countries stand to gain a lot. The UK is one of the world’s largest economies, home to many of the world’s greatest universities and research centres, and world class legal and regulatory institutions. An Indian business interested in the UK could thus gain access to the UK’s world class workforce, regulatory and legislative environment, and large market if it were to act upon its interest.
In particular, the UK remains a leading financial centre. Expertise in the STEM areas is also a great opportunity for collaboration and partnerships in engineering, manufacturing, and infrastructure, both for industry and academia and research. The UK also has the lowest corporate tax rate amongst the G7, and the new points-based immigration system launched in 2020 has made it easier for Indians to come to the UK to live and work.
While for UK companies looking to enter or expand in India, the opportunities are enormous. India is already one of the world’s largest economies and is set to grow the fastest of any major economy in coming years, eventually becoming the world’s third largest economy. Therefore, there is a huge untapped potential for investment. And the ever improving ease of doing business in India and between our two countries will help to underpin the opportunities available.
Q: What are the challenges you are foreseeing for the economies of India and the UK, and also for the bilateral trade between the two countries? How can they overcome these challenges?
A: The most obvious challenge is the coronavirus pandemic, which has hit both economies hard. The pandemic is striking in waves and while the UK is currently coming out of its second wave, India is on the face of it approaching the peak of its second wave. It is heartening to see PM Boris Johnson’s offer of support to India. Relatedly, vaccine rollout is a challenge because as we know there are currently not enough vaccines for the world’s population. India’s challenge is more daunting given its population and expanse. So, working together to help both our countries to get vaccinated is a challenge that can be overcome through perseverance and shared trust.
Making it easier to trade and invest and do business in both our countries will help by enabling businesses to utilise their proficiencies. That means having moderate tariffs, simplifying bureaucratic processes, having a stable tax regime and ensuring regulatory certainty, protecting the intellectual property, getting into data adequacy agreements, for instance.
Beyond COVID recovery, climate change is going to be an ever-present challenge for decades and will shape not only the types of energy and processes we use but investment behaviour for example. There are solutions available to make a difference now, like electric vehicles and related charging infrastructure, waste to energy, renewable energy, and green bonds and financing. Maximising rollout of these sorts of products and services will help both countries’ economies to grow sustainably, by making use of shared innovation, entrepreneurship, and manufacturing capabilities.