While the UK has been making consistent efforts in strengthening its ties with India following Brexit and the rapidly changing geopolitical landscape, there are many areas which have huge untapped potential with many missed opportunities. A Free Trade Agreement (FTA) was discussed in the 14th Joint Economic and Trade Committee meeting (JETCO). The British Commission said that the UK’s new Global Tariff Schedule will bring benefits of up to £40 million per year for Indian exporters if all the duties are levied. This will contribute to the UK’s pledge of an increasingly open trade upon Brexit. The UK and India must prioritise laying groundwork for an FTA in the near future. They should address issues like non-trade barriers for high skilled professionals in the UK. Despite being the second largest market for Indian tech companies for service exports, the UK has tough non-trade barriers like National Insurance that result in Indian professionals forfeiting the entire amount paid in as it requires at least ten years of contribution to gain entitlement. India should be added to the list of low-risk countries for movement of skilled workers to ensure an easy flow.
The Group CEO of UK India Business Council (UKIBC), Jayant Krishna, says: “To advance the bilateral economic partnership, UKIBC would strengthen its support to the UK and Indian industry, encouraging bilateral trade and investment. Both countries’ nominal GDP has grown to a comparable size and they are now working to overcome the economic crisis induced by the pandemic. It is a critical time for both countries as the UK readies itself for a post-Brexit world, and India establishes itself as a significant global economy.”
The UK is ranked 17th in the list of India’s trading partners, with trade in goods as $14.5 billion and in services as $7 billion. It is ranked the fourth among the largest investors in India with a cumulative equity investment of $26 billion since April 2000, with around 6% of all FDIs into India. High potential areas include healthcare, agriculture, R&D, financial services: fintech, green finance, cybersecurity and insurance.
The UK and India work together on AI for better healthcare, fintech for financial inclusion and payments solutions and cyber security to protect assets from virtual threats, with the UKIndia research partnership including 200 projects, 175 research-institutions and 100 industry-partners. This marks the beginning of a partnership to build an innovation ecosystem with regular exchange of ideas and emerging technologies, and renewed support for entrepreneurs and innovators.
India is the third largest investor in the UK (850 companies earning £48 billion, employing 105,000 people), with 1.5 million Indian diaspora in that country. The downside of Brexit is that India has seen the UK as the gateway to Europe for decades. The UK can support Indian companies by providing financial incentives and tax breaks. Meanwhile, India should reduce corporate taxes and progress in data privacy. UKIBC has suggested an approximate 3% decrease in corporate tax which will potentially make India a more attractive destination for investments as such taxation issues are eliminated.
Advanced manufacturing and engineering requires strong Intellectual Property enforcement. India needs to adopt a more liberal, fair and transparent approach to personal data protection. To achieve the vision of Ayushman Bharat, India could greatly benefit from UK in designing a regulatory framework for drug pricing which ensures the balance between pharmaceutical sustainability and affordability for Indian citizens. An underutilised UK-India partnership would be that of legal, professional and financial services for which India serves as a huge potential market. The insurance sector has a huge untapped potential for collaboration with UK. Another critical area would be mutual recognition of professional qualifications allowing knowledge exchange and mobility.
Amidst the pandemic and geo-political tensions with China, many UK companies are increasingly looking to diversify their manufacturing base out of China. While India provides highly trainable and cost-effective labour, substandard infrastructure in ports/highways/logistics, increases production costs. India has to reform its FDI policies for a hassle-free process for foreign investors.
The new UK Health and Care Visa for critical healthcare professionals from around the world, makes it much easier for health professionals to work in the UK under NHS, as they will be exempted from the annual Immigration Health Surcharge. Such policy changes make it easier for Indians to work in the UK, have access to the best of British institutions and further strengthen the UK-India dynamic by a shared ecosystem of cuttingedge technology, top talents, and R&D. Furthermore, a New Graduate Route, anticipated to commence from 2021, will allow international students to stay in the UK upon completion of their studies. This will help skilled international students to work in the UK’s skilled sector and boost its economy.
In light of emerging defence, technological and industrial priorities, and opportunities due to the changing landscape of geopolitical relationships, the bilateral military ties between India and the UK need to be reinforced. With Defence and International Security Partnership (DISP) established in November 2015, more meaningful defence dialogues about strategic convergence and threats to mutual interests will strengthen this relationship.
Focussing on defence industrial collaboration is a critical aspect of defence ties between the two countries. UKIBC has established an Aerospace and Defence Industry Group which may contribute to Aatmanirbhar Bharat as it builds an ecosystem for Indian defence manufacturing, helping achieve India’s vision of indigenous defence modernisation, in line with the 9 August announcement by the Defence Minister.
The UK could take advantage of India’s extensive industrial capacity to build scale and lower costs for a competitive edge in the exports market. The establishment of ADIG helps improve the ease of doing business in India by British defence companies. In this time of crisis, UK-India collaboration in vaccine trials and potential vaccine manufacturing (Oxford University-Serum Institute) can be a stepping stone to many opportunities in the future, as India is increasingly gaining prominence in the global economic and political map.
Rajesh Mehta is a leading International Consultant and Policy Professional. Badri Narayanan Gopalakrishnan is Founder Director of Infinite Sum Modelling, and affiliate faculty member at University of Washington, Seattle. Srujanee Mishra is a researcher at Infinite Sum Modelling.