South Asia Trade Specialist, Tony Parry discusses a new phase for India’s importance as a trade hub…
From the Jewel in the Crown of the British Empire, to an even more potent Jewel in the Crown of the Commonwealth, and beyond…
Ten months ago, I said that I would continue from March 2018 by giving some comments on aspects of UK connections with India. I have been somewhat slow in following up with that, but I’ll rectify that situation from now on.
A number of people have suggested that, following Brexit, however that turns out, it would be sensible to look to the Commonwealth as a market to develop for the future. We should maybe look at a new take on the “Jewel in the Crown”. The Crown now being the Commonwealth, and India being the Jewel. Where for the UK? Manoj Ladwa, the founder of India Inc, the CEO of MLS Chase Group, and a Brummie, has been advocating what he calls “Reimaging the Commonwealth”. This is a great idea, which develops the concept of the Commonwealth from an ex-colonial club to a global mover of the 21st Century.
India is now the fastest-growing and also the second-largest economy within the Commonwealth, and has grown hugely in global power and heft. Many smaller nations are now using India as a template.
The Jewel, India and the UK, its setting perhaps, are increasingly on the same page as far as the Commonwealth is concerned. Both an increasingly confident India and the UK both understand the threat posed by growing and by harnessing opposition to free trade with other members of the Commonwealth amongst whom we find Canada, Singapore, Malaysia, South Africa, Australia, New Zealand, and Nigeria who are now weighty players, and economic cheetahs such as Rwanda. Additionally, the Commonwealth must act as a positive counterweight to China, particularly where the Belt and Road [or Silk Road Economic Belt] development has plans in Commonwealth geography.
India has responded by suggesting the idea of a Commonwealth Trade & Investment Centre, located in India – to be the engine for world free trade. It is paramount that this entity is adequately resourced with world-leading infrastructure and world-class talent.
Sadly, post Brexit, it looks like the UK will lose most of its auto manufacturing, together with the design and logistic skills involved. However, India has a burgeoning auto industry, and companies such as Maruti Suzuki India, the country’s largest car manufacturer, Ford India, Honda Cars India, Mahindra & Mahindra (M&M), Hyundai Motor India and Toyota Kirloskar Motors all present opportunities for those UK skills to be transferred to India.
The Commonwealth must be absolutely relevant to every member for the idea to succeed, but the opportunity is there.
OK, back to where we are now. Whilst the UK has been tearing itself apart over Brexit, India has been charging ahead. If we can change Mrs May’s stone age views on UK visas for Indians on which Lord Bilimoria is leading the charge, we can drive Manoj Ladwa’ s Future Commonwealth to success.
Kevin McCole, COO of The UK India Business Council presented his view of UK India relations over a ten-year timeline and has kindly allowed me to borrow freely from that work. “The change in India over the last decade, particularly over the last four years under Mr Modi, has been dramatic. And there has been a similarly striking change in the UK-India relationship in that time. There are impressive macro numbers. India’s GDP has almost doubled from $1.2 trillion to $2.5 trillion since 2007. The GDP per capita has increased by around 60%. And FDI into India in 2017 was double what it was 10 years ago.
But these numbers don’t really give a sense of how the Indian economy and the lives of Indians have transformed. There are many examples of this transformation, but I will focus on only a few.
In 2007, there were 10 million mobile phone users in India. Today there are one billion. And rising. In 2007, no Indian had an ID card. Today, almost 1.2 billion Indians have a digitally-driven biometric ID card. 1.2 billion and, as the young population continues to grow, still rising. In 2007, financial inclusion rarely reached people outside of India’s cities. But, since 2014, an additional 300 million Indians have a bank account.
These transformations lay the foundation for a compelling, digitally-led, India. And for a strong, forward-looking UK-India (a keystone for the Future Commonwealth to work) partnership. I’ll return to this later.
So, has the UK-India partnership changed in the last decade?
Since 2007, we have seen multi-billion-pound major investments in India by the likes of Vodafone, BP and Diageo” The traffic was very much two way. Tata Steel bought Corus in 2007. And Tata Motors bought JLR in 2008. However, Brexit is wreaking havoc with India into UK manufacturing FDI. India saw the UK as an aircraft carrier offshore from the EU. With UK’s departure from the EU, the equation changes.
However, there have been thousands upon thousands of deals done. Particularly in the IP and Innovation fields. Partnerships formed by SMEs, universities, and research institutions. The UK-India commercial relationship has gone from strength to strength.
The UK’s diplomatic engagement with India has also significantly strengthened. Since 2007, the Government has opened four new deputy high commissions, making India the UK’s largest diplomatic network.
So, the last decade has seen much positive change. But where will we be 10 years from now?
According to Morgan Stanley, India will have a $6 trillion dollar economy within 10 years, making it the third largest in the world. Internet penetration in India will double in the next 10 years, meaning over 900 million Indians will be online by 2027. There were 300 million smart phone subscriptions in India last year. This will rise to 700 million in 2020.
Many more Indians will be online, and many more will be on the move. The Ahmedabad-Mumbai bullet train is due to be up and running by 2022. And, by 2025, Richard Branson will link Pune and Mumbai by Hyper-loop. And, despite this competition on the surface of the earth, more people will be travelling by air. In 2007, there were 96 million air passenger journeys in India. Last year there were about 220 million. And, by 2027, it is estimated that there will be 700 million air passenger journeys per year.
So, with these changes and opportunities emerging in India. And with Brexit. There will be a new dynamic in the UK-India relationship.
As the UK leaves the EU, our Government has made it clear that it wants to be an advocate of free trade. The Government has also made it clear that it wants to build a stronger economic partnership with India.
To these ends, there is excellent work under way in the Joint Trade Review, through which the Governments are examining non-tariff barriers in three shared priority areas: food and drink; life sciences and healthcare; and ICT. These are areas where companies from the South West can find traction.
While this trade policy dialogue is important, businesses can’t, and must not, wait for a trade deal before increasing engagement with India. There are tremendous opportunities across all sectors: defence; aerospace; in all things digital; energy; education; transport; healthcare; and building smart cities. Etc. etc.
The initiatives announced will connect start-ups, SMEs, venture capitalists, big businesses, and universities in both countries. There will also be a pairing of innovation clusters, such as Pune and the Sheffield City Region.
By focusing on collaborative innovation, both countries are future proofing their economies — individually and together. Another win-win for the UK and India.
So, the UK-India business relationship is certainly bright. Barriers to business will reduce as a result of the trade review. And tech-rich businesses will find ever more opportunities.
So, as I said last time. And no apologies for repeating this:
Your scribe is a little bemused that China has drawn a lot of favourable economic and business sentiment vis a vis India over the past two decades or so. A bit odd really. About 250 million Indians speak English as an alternate or second language; Indian commercial law closely follows English law, brands such as Leyland, Typhoo, Royal Enfield are still huge in India, and they play a mean brand of cricket. You will feel right at home there.
So, I’ll try over the coming period to entice you to do business with India.
Incidentally, for mirror reasons to those expressed above, Indians feel right at home here. You are pushing at an open door when trying to entice Indian investment here, and India is still a place where UK brands work.
Sources: Kevin McCole; UKIBC. Manoj Ladwa; India Inc
If you want to talk about anything Indian. Let me know. Been there, done that, got all the maps and postcards. Get in touch.
Tony is South Asia Trade Specialist at International Trade Matters