When it comes to trade and investment, India has long been seen as an important and high-potential market and partner for the UK. While the investment partnership is flourishing, it is fair to say that India has often been found to be a tough market and the trading partnership has never quite achieves its potential.
There are, though, clear signs that things are changing. Sings that as India grows to be the world’s third largest economy and third largest consumer market by 2030, the barriers to entry are reducing. I think there are two broad reasons for this.
First, the Indian Government and individual State Governments have introduced legal and procedural reforms, which has seen India rise, since 2015, from 142 to 63 in the World Bank’s Ease of Doing Business rankings.
The second reason is the announcement by Prime Ministers Modi and Johnson in May 2021 of the UK-India Enhanced Trade Partnership and the start of FTA negotiations before the end of the year.
Pre-FTA negotiations are progressing quickly, with the negotiating teams and Ministers in regular contact. And there is real optimism that a deal, or a series of deals, can be done to make it easier for companies in both countries to trade and invest.
We at the UKIBC, working with DIT, ran a series of roundtables during the summer capturing inputs on the FTA from around 200 companies – from SMEs to MNCs and from across all sectors. There were a wide range of recommendations, which we sent to both Governments. But if we were to summarise the key points, are that the FTA negotiations should focus on:
- reducing tariffs. For UK companies, priority sectors were alcoholic spirits and medical devices. Indian companies asks include textiles and basmati rice;
- businesses from both countries also want to see a reduction in non-tariff barriers to goods trade, such as aligning standards, simplifying costly customs procedures, ensuring tax parity between UK and Indian businesses, and securing mutual recognition of qualifications in higher education and the professional services; and
- businesses from both countries want to see the alignment of data protection rules and IP/patent protection so as to drive collaborations and trade in the innovative, tech-rich, and digitally-driven industries where the UK and India already excel. As two geographically-distant, service-based economies, digital trade will be critical to the relationship’s success.
We also recommend that the Governments seek to sign a series of mini-Agreements that will, over time, form a fully Comprehensive FTA. This approach would capitalise on the excellent momentum already created, it would lock-in wins and deliver economic benefits on an ongoing basis, and it would build the trust that will be required to overcome more difficult issues.
Bilateral trade rose to GBP 24 billion worth of goods and services in 2019. It dipped in 2020 due to the pandemic, but our governments and many of our businesses cooperated during the COVID-19 crisis to support each other in times of need. Being the 5th and 6th biggest economies in the world, and both projected to grow significantly in 2021 and 2022, the signs were already positive. Then add in the potential game-changing Enhanced Trade Partnership and FTA and the governments’ target to double trade to GBP50 billion per year by 2030 looks entirely possible.