India has huge growth potential which is yet to be fully realised by UK businesses. Despite the historic ties, the large Indian diaspora in the UK and our familiarity with its food and festivals, India has not received the attention it deserves. There are, of course, hurdles to closer ties between the two nations, but a trade deal would bear too much fruit for both sides to allow talks to fail.
The importance of the trade and investment relationship between the UK and India has been growing over the past few years. Trade between the two countries is already worth around £23bn a year, supporting more than 500,000 jobs, and both governments have set out a joint plan to double this by 2030.
The next step in this journey will take place this week as Chancellor Rishi Sunak and Indian Finance minister Nirmala Sitharaman hold the 11th UK-India Economic and Financial Dialogue (EFD). The focus will be on building a “21st century partnership”.
While these dialogues can seem a bit like talking shops to outsiders – the outcomes are a testament to their importance. For example, last year, the 10th dialogue led to India allowing greater foreign direct investment in the insurance sector by partially removing restrictive “Indian ownership and control” requirements, and commitments to finance India’s $1.4 trillion National Infrastructure Pipeline.
UK financial services exports to India have been rising steadily, with an annual average growth of 14.5 per cent, taking exports from £170m in 2015 to £370m in 2019. And on the investment side, Indian firms have raised £11.5 billion in masala, dollar and green bonds listed on the London Stock Exchange.
The progress made during these dialogues is a positive sign for the UK-India free trade agreement (FTA), which the government is aiming to start negotiating this year. There is a great opportunity for a new FTA to focus on areas of future growth like green finance, data and risk management which have the potential to support growth and new jobs in both the UK and Indian economies. Liberalising India’s legal services market is another area which could benefit businesses and consumers in both countries.
The FTA with the UK will offer the Indian Government the chance to demonstrate its intention to be an open and outward looking economy, building on the recent changes to remove retrospective tax legislation. Unlike many other markets that it has negotiated with, the UK is a services based economy that closely mirrors India’s own. This offers up great opportunities for both sides to help companies easily expand in both directions. The UK has the largest foreign exchange market, it is the legal centre of Europe and a world leader in Fintech and sustainable finance. All of these jewels should appeal to Indian.
Access to that ecosystem is highly valuable for Indian firms looking to grow internationally. There will of course be tensions, especially over agriculture and mobility, but in the end, there is far more to be gained than lost through an ambitious trade agreement.
Much work remains to be done. India is currently the world’s sixth-largest economy but ranks only 61st as an export destination for UK financial services. Through the India UK Financial Partnership, we are looking to create more opportunities for UK and Indian financial and professional services businesses and lift the level of ambition in both trade and investment.
Going forwards, the UK needs to make a long-term commitment to growing its ties with India and stay the distance. As a former senior trade and investment representative in India for the Australian Government, I know first-hand both the frustrations and the prize that awaits those that invest for the long term.
On both sides, we need to focus on delivering practical commercial benefits for business. Neither side is likely to allow this week’s talks to be driven either by sentimentalism or allowing the relationship to be imprisoned by the past. The opportunities, for both sides, are just too great. As I learned from my time in India “nothing is easy, but everything is possible”. It is in this spirit that we should look to build the next stage of our economic engagement.
Credit: Source link
