The UK and India: Moving forward together
India and the UK have more than 200 years of shared history characterised by democratic traditions, connected cultural institutions, and the English language.
This history is a strong foundation on which our bilateral trade and investment relations are continually nurtured and reinforced.
Our investments in each other’s economies have grown over the years, and there is great potential for collaboration and excitement about the opportunities ahead.
Today, the UK and India are among the largest investors in each other’s economies. Britain stands as the fifth largest inward investor in India, ranking second among the G20 countries, and accounting for nearly six per cent of all inward investment into India between April 2000 and March 2019.
From the UK side, Indian companies make a huge contribution to the British economy. According to the 2019 edition of the CII Grant Thornton India Meets Britain Tracker, there are now a record 844 Indian companies operating in Britain, with combined revenues of over £48bn. Together, they paid almost £687m in corporation tax and employed 107,422 people.
Looking ahead, Indian businesses are optimistic about the UK’s economic future, which is reflected in the growing investment from Indian companies in the UK, particularly in the fast-growing tech and IT services sectors.
Indian companies are helping UK companies grow and compete, boosting productivity, providing jobs, and offering skills development. Indian business is clear that Brexit will not change this deep and special partnership.
The UK has relatively low corporate tax rates, offers ease and speed of setting up a business, ensures a stable political and security environment, and promotes a strong R&D ecosystem. These benefits will all persist, irrespective of the Brexit negotiations or any changes in the government.
However, there is always more that can be done to fully embrace the opportunities of this relationship and build even greater bilateral collaboration.
Take trade, for example, especially in services. The UK is the world’s second largest exporter of services and India has the world’s second fastest growing services sector, with a compound annual growth rate of nine per cent. There is huge potential to increase bilateral trade in this area.
In terms of specifics, a good place to start would be the financial and legal services sector.
The Indian and UK governments have jointly identified the importance of the expansion of banking, accountancy, insurance and legal services in India, to both support the country’s economic growth, and facilitate competitive international trade.
London, as the world’s financial capital, is critically placed to help India raise the capital it needs to continue its impressive economic and infrastructural growth, and UK businesses have the expertise and ambition to meet the rising demand for financial services in India.
Nor is it just about large established firms. With SMEs making an increasing contribution to the national GDP and trade basket of both India and the UK, the two countries should step up the bilateral SME trade and collaborations, particularly with regard to technology sharing and financing of business.
Next, manufacturing. The Indian government has recently taken key steps to usher in transparent, accountable and efficient processes for attracting FDI in sectors like defence, automotive and pharmaceuticals manufacturing. This offers a range of compelling opportunities to British firms looking to invest in India’s manufacturing sector.
India and the UK also see great scope in undertaking joint research and development projects in cutting-edge fields such as advanced engineering. The bilateral industrial R&D programme could be further expanded to areas beyond energy and healthcare.
Finally, there are a multitude of technology-driven areas where India and the UK could collaborate and put themselves at the forefront of the evolving fourth industrial revolution.
Tie-ups between India’s advanced manufacturing sector and the UK’s High Value Manufacturing Catapult programme could be enhanced to develop technology and skills, particularly focused on advanced materials and manufacturing.
Today more than ever before, both the UK and India stand at a crossroads. This could be a pivotal moment – together, our countries can help redefine the contours of the partnership.
And Indian industry stands ready to support the growth and progress of this relationship.