Why India could be a strong trading partner for the UK – and your business

While the UK’s trading relationship with the EU has been uncertain since the Brexit vote in 2016, UK-India ties have been deepening across sectors. In 2017, India was the UK’s eighth largest bilateral trade partner outside of the EU countries. Growing by almost 14% in 2018, the partnership is now valued at £20.5bn.

The demand for British goods in the Indian market has recorded nine consecutive quarters of growth since October 2016. In 2018, UK exports to India grew by 19.3% to £7.9bn, making India the UK’s 12^th largest export destination outside of the EU. It seems Brexit has not dented the increasing demand for British products and services.

The relationship works both ways. India, the fastest growing economy in the world, is also the UK’s fifth largest non-EU source of imports. These grew by 10.3% in 2018 to reach £12.5bn, and include goods such as clothing, precious stones, metals and minerals.

And at the heart of the relationship lies investment. The UK and India have been in the top five investor rankings in each other’s economies since 2010. In 2017, India’s stock of foreign direct investment (FDI) in the UK was £7.5bn – the largest stock of Indian investment over the last decade. The UK’s FDI stock in India was £14.4bn.

The products and services in demand

400 UK companies are currently in India, and 12 of the top 25 EU investments since 2000 have been from the UK. This relationship is responsible for the creation of almost half a million jobs.

Traditionally, India has been receptive to products including finished goods and business services from the UK, now the market is opening up to include opportunities for the oil and gas sector, agri-related products and professional services.

The UK’s top exports to India generating recent growth include aerospace and power machinery, pearls and precious metal, travel, transportation and business services. The two countries are exploring mutual interest and enhanced collaboration in the areas of energy, finance and technology. Both have been engaged in multiple partnerships on the use of artificial intelligence-based applications to facilitate the connectivity of health centres, for example.

What you need to know about the business environment

With its expanding middle class, a young demographic and renewed global outlook – through programmes such as ‘Make in India’ –  India is fast becoming a global manufacturing hub. In its efforts to become a favourable investment destination, it’s also become a more business-friendly environment.

India has made massive strides in the World Bank’s Ease of Doing Business rankings, leaping 65 places since 2014. It’s now 77^th. Individual states such as Karnataka, Maharashtra, Andhra Pradesh and Gujarat are also becoming more proactive in implementing strategies that can attract more foreign investment to their state.

Continued reforms in taxation, digitalisation, simplification of labour laws, increased investor protections, and a reduction in red tape have all contributed to improvement in India’s business environment. Likely improvements and tweaks in environment regulations, standards, certifications and transfer pricing issues are expected to be addressed in the short term – although the scale and speed of change will somewhat depend on the result of the General Election in May.

A growing opportunity post Brexit

As the UK prepares to leave the EU, it’s clear that India can be UK’s top tier trade and investment partner outside of it. As the two countries look to strengthen their ties, UK businesses can be a vital partner of India’s domestic economy to quench its consumers’ growing appetite for goods and services. They just need to seize the opportunities.