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February'20

A New Dawn for Indo-UK Trade?

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The exit of Britain from the EU on India will have a significant effect, as it is the largest export market for India

The UK officially became a non-member of the European Union (EU) from Friday January 31st night, a certainty welcomed by Indian businesses operating in the UK as well as British businesses keen to expand into the Indian market.

The official transition period from Saturday until the end of December means status quo in terms of much of the trade and business operations vis-a-vis the UK and EU. But what does change is Britain’s free hand to strike new deals and partnerships around the world. Leading trade organisations and Indian entrepreneurs see this as an exciting time for the India-UK trade and economic partnership to be taken to a new level.

The reason given by those who wanted to leave the EU was that it is necessary to move out of the EU in order to protect the identity, culture, and independence of the country along with its place in the world.

Those who were in favour of staying with the EU said that by remaining in it the economic gains are far more as compared to the other factors given by the people who are not in favour of staying in it.

Lord Karan Bilimoria, founder of Cobra Beer and Vice-President of the Confederation of British Industry (CBI) is of the view that India will be a vital trading partner as the UK charts a new future outside the EU. As someone who campaigned for the UK to remain in the EU in the June 2016 Brexit referendum, the India-born entrepreneur is now focussed on ensuring that the opportunities unleashed by Brexit are fully capitalised and that is where comes a checklist for India.

Bilimoria feels to fully capitalise on these opportunities, British firms would like to see further progress in reducing corporate tax rates, data privacy and ease of doing business indicators. If these steps are taken, and the UK maintains an active strategy for engagement and interaction with the Indian economy at all levels, it will remain a significant partner in India’s future growth story.

Lord Swaraj Paul, who heads the London-based Caparo Group with operations worldwide, is of the view that there was a mess in the handling of the Brexit negotiations, and everyone will just be glad that the mess is over. According to Lord Paul the UK has never been entirely happy with its EU membership. As far as India goes, it has a relationship both with the UK and the EU and both will be strengthened further.

Boris Johnson has repeatedly singled out India in the list of countries he wishes to strike an enhanced trade agreement with, ever since he pitched his tent in favour of Brexit. As Prime Minister now with a thumping majority in Parliament, he is seen to be in a position to action some of those promises. Meeting PM Modi on the sidelines of the G7 summit in Biarritz, France, in Dec 2019, PM Johnson indicated a big surprise soon regarding the Free Trade Agreement (FTA) between the UK and India.

India could see Brexit as an opportunity to reset the legal terms of its trade with the UK and EU, through free trade agreements. Indian companies operating in the UK may have to face some glitches. As far as migration in the UK is concerned, India will have a slight advantage.

The exit of Britain from the EU on India will have a significant effect, as it is the largest export market for India. The investors are concerned that it might have a negative effect as India invests more in the United Kingdom than the rest of Europe combined. UK’s third-largest Foreign Direct Investment (FDI) investor in India. There are more than 800 Indian companies in Britain. UK accounts for 17 percent of India’s Information Technology (IT) exports. If Britain chooses to opt-out the overhead costs are also going to increase.

Britain was considered to be a gateway to the EU for India, with it opting out, the advantage by India is lost. Therefore, there is a need to get border-free access.

Brexit will hamper India’s businesses based in the UK as till now they had border-free access to the rest of Europe. This was the main reason why Indian companies go to the UK. Brexit may have an impact on the decisions of Indian companies to invest in the future. In totality, the sectors, which will be affected because of Brexit, will be auto, auto components, metals, oil, pharmaceuticals, IT, etc.

However, in reality an FTA between the two countries will have to be tilted in India’s favour, as first, it offers a huge market to the British businessmen from defence to infrastructure to services, virtually in every sector. Secondly, the UK does not seem to offer much to Indian businessmen, who now have been forced to operate from a EU-member country for the bigger EU market as compared to the UK market. Ultimately they may give the UK a miss, as is apparent from the Indian government’s stance, which has been stalling the FTA signing for the last many years.

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