Published: 18 December 2017
Area of Law: Brexit
Is UK-India trade the real marigold?
What makes the UK-India business relationship so attractive? One of the fastest growing economies in the world is impressive, but will the recent reforms in India and the impact of Brexit in the UK, shape up or rock this bond? We put the topic under the spotlight with an event held at the Shard in London, bringing together some of the brightest and best from both the UK and Indian business worlds.
The UK is consistently ranked by the World Bank as one of the best jurisdictions to set up business. More than 800 Indian-owned companies operate in the UK, employing over 110,000 individuals - these companies include some of India’s most prominent corporations, including the Tata Group, Hinduja Group and businesses under the Kanoria Group umbrella.
The UK is very supportive of the Indian Government’s “Make in India” initiative which will help in building greater synergies with UK’s robust manufacturing industry and experience in sustainable development, innovation and skills. This year, the British motorcycle maker Norton Motorcycle set up a 50:50 JV with Firodia Group's Kinetic Motors and plans to manufacture by the end of 2018 and eventually export mid-sized bikes.
India has it place firmly on the world’s business stage and is increasingly seen as a hotbed of creative entrepreneurship - technology, manufacturing, infrastructure, tourism to name just a few; and it’s most ambitious young business people have these sectors firmly in their sights. This year, the World Book of Records recognised The Golden Temple in Amritsar (North India) as the “Most visited place in the world” with over 100,000 visitors a day is remarkable! Definitely a big tick for the Indian tourism economy.
But hands down, technology is the real deal with India’s Silicon Valley - IT and business process outsourcing are two major components that make up this a booming sector with it generating US$ billions.
And then, there is Brexit... problem or opportunity? Well for India, it’s not all doom and gloom - Brexit definitely presents some potential opportunities. The value of the Pound relative to the Rupee has rendered the UK a cheaper, more attractive destination for Indian companies seeking to buy high-priced commodities, such as real estate. The future of trade, skills and knowledge transfer is changing. Question marks over what trading agreements the UK will have with the rest of Europe still remain and businesses are beginning to look for new opportunities elsewhere – and India is a tempting destination for many reasons. But cultural and business environments are very different and although this may be frustrating for some, to be truly successful in India, you have to immerse yourself in it’s ways and manage your own expectations – JCB, who operate in India at a substantially large scale, did exactly this and is fine example of success.
So, how can these two nations share common sentiment to make the most of today’s economic times and emerge stronger than ever. Our panel, made of the following, had this to say:
India – still an important trade partner?
- Abhijit Mukhopadhyay, Hinduja Group
- Tijen Ahmet, Shakespeare Martineau
- Philip Bouverat, JCB
- Matthew Crate – Moneycorp
- Dr Sanjeev Kanoria, Kanoria Foundation, Austrian Anadi Bank and Advinia Healthcare
- Abhinay Muthoo, University of Warwick
- Suhas Srinivasiah, Kochhar & Co
The UK’s history of trade with India has in the past been incredibly active, but now the country is around the UK’s 17th most important trade partner. Over the last 10 years, whilst the UK has been selling less and less goods to India, India has been selling more to the UK. The potential for India to jump up the scale of importance is there, and we must take advantage of it.
In terms of the goods and services exchanged between the two countries, India sells predominantly IT and consultancy services, Britain sells education. Despite this, opportunities to diversify trade and to attract inward investment in both countries are arising and must be acted upon.
A CBI report published earlier this year reported that the UK was the largest G20 investor in India and was responsible for 8 percent of all Foreign Direct Investment into the country between 2000 and 2016. On the other side of the relationship, Indian companies currently employ around 110,000 people in the UK, primarily in the telecoms, pharmaceutical and chemical, and business services sectors.
A shifting immigration landscape
The UK’s academic offering is one of the best in the world and India has been a significant source of overseas students for some time. Now, with immigration firmly on the Government’s agenda, steps must be taken to ensure the barriers are removed as best as possible for Indian students looking to come to study in the UK.
Strict changes to the Post-Study Work Visa in recent years has left many international non-EU students looking to come and study in the UK, questioning whether the longer-term uncertainties about ability to remain after finishing justify the move.
Previously, the visa scheme allowed non-EU students to remain and work for up to two years. Under the current system, moving from a student visa to a work visa involves having a graduate-level job with a minimum salary, with a Home Office registered employer.
Future flow of student talent on an international scale, not just between the UK and India, requires Government action and a more pragmatic approach to immigration. If there are students around the world who meet our criteria, why aren’t we making the process as simple as possible for them to come and study in the UK?
A different regulatory environment
The India Rupee is restricted currency, and this can cause issues for Indian businesses looking to come and trade in the UK – many of whom are forced to undergo two separate transactions, one into dollars and the other into sterling. By doing so the business would be navigating the foreign exchange market twice and therefore would be subject to exchange rate fluctuations each time.
When compared to an EU business, Indian businesses looking to set up trade operations in the UK would enter the market with double the cost.
Working towards a solution which both encourages bilateral trade and investment requires collaboration between both the Indian and UK government. With the nature of future trade with the EU still uncertain, businesses in the UK will be looking for other global markets to explore and the fast-paced nature of India will likely make it an even more attractive option. Any barriers in terms of currency regulation which can be removed where possible will be incredibly beneficial.
Culturally, the UK and India are very different places to do business in and a collaborative future relies on businesses from both nations feeling comfortable with each culture.
The thriving consultancy scene in India has meant that there are pockets of the business world which function well there, however other sectors are not necessarily seeing the same success, with employees often taking longer to adjust to their new surroundings.
Overcoming this hurdle forms a key part of a true bilateral relationship, with equal exchange of goods, services, people and knowledge between the two countries.
If you would like to discuss business opportunities in UK-India – please contact Ravi Goonesena
who will be happy to help.
Please click here to read our guide on investing in the UK and India.