The UK India Business Council (UKIBC) has appointed Jayant Krishna as its group chief executive officer in India for the first time. Krishna spoke to Rajeev Jayaswal about the plans of UK firms to set up their manufacturing bases in India. Edited excerpts:
Many multi-nationals are considering exiting China and looking for India as one of the alternatives. What is the view of the UK industry on this matter?
UK firms, like many multi-nationals, have started looking at diversifying supply chains as a result of the [Covid-19] pandemic, and India, with its already large and growing market, presents an attractive destination. The UK industry has long invested in India across sectors. It is not just the shift to reducing reliance on China or other areas that will see that grow, but directly the rapid improvement in the operating environment in India – the rise of India in the World Bank’s Ease of Doing Business rankings is testament to that – and the growing opportunities as the Indian economy continues to achieve its full potential on the world stage.
Why would British firms prefer India over China?
UK businesses are and will look to India as an incremental base for manufacturing and research and development, among other areas. I cannot say now how many British firms are looking to shift from China to India but some of them are contemplating exploring India as a manufacturing destination in addition to their existing investments in China. But I would say that India is an extremely attractive country for British firms to invest in.
How do you see India as an investment destination?
I think it is widely agreed that India is already establishing itself as an important global player, both economically and geopolitically, and that journey is moving forward. In not so distant a future, India will be the largest country by population and the third largest in terms of the size of its economy; and quite understandably, businesses want to be a part of that.
From a UK perspective, that thought process is heightened by Brexit, in which the UK is forging new trading relationships, post-Covid-19.
In terms of policy changes, those mentioned previously in the priority sectors of food and drink, life science and healthcare, and digital and data services, should be the focus, and ultimately make it easier for the UK firms to do business in India.
India has significant legal and regulatory barriers still to overcome, as our members have told us every year in our annual Doing Business in India survey run since 2015. Progress has been made but making the regulatory framework more equitable would indeed be very positive for attracting more investments.
Is the Atmanirbhar Bharat Abhiyan (self-reliant India Initiative) congruent to enhanced bilateral trade between India and UK?
UK businesses remain committed to India and want to be part of and support India’s Atmanirbhar Bharat mission. With that being said, it is vital that India remains open to international trade and investment.
India has made great progress in terms of economic development since opening up to international markets in 1991 and the ambition to become the world’s manufacturing powerhouse is quite appropriate. But to do so, India will need imports and technology and knowledge transfers if it wants to be a competitive exporter.
Should India remain open and speaking with senior government officials I am reassured that it will, I see no reason why bilateral trade between the UK and India will not grow. At the JETCO [UK-India Joint Economic Trade Committee], both governments were in agreeance that the relationship has grown in recent years and the pandemic, Brexit and India’s global ambitions present an opportunity to revitalise the relationship.
There are great complementaries between India’s needs and the UK’s offering and it was very positive to hear that Prime Minister Narendra Modi highlighted the centrality of sectors such as manufacturing, infrastructure, energy, pharma, space, and defence, to global cooperation. These are all areas ripe for India-UK collaboration in creating Aatmanirbhar Bharat, underpinned by both nations’ strong track record in technology and innovation.
How much have India-UK trade and investment increased?
Since the turn of the century, the UK has been one of the largest investors in India, totaling over £22 billion in last two decades, and making it the second-fastest-growing G20 investor in India. And in trade, it is clear that businesses and consumers share confidence in one another – demonstrated by growth in trade to £24 billion in 2019. Likewise, FDI [foreign direct investment] from India reached £11 billion in 2019.
What are the problems and prospects of trade and investment relations between India and the UK?
The prospects for trade and investment between the UK and India are certainly upbeat. At the JETCO at the end of July, UK secretary of state for international trade Liz Truss and India minister for commerce and industry Piyush Goyal recommitted to important progress to remove non-tariff barriers in core sectors of food and drink, life science and healthcare, and digital and data services, in the shape of an Enhanced Trade Partnership.
Business-led joint working groups highlighted the key challenges to trade and made formal recommendations to overcome these. The next round of JETCO is scheduled to take place in autumn where the ministers will discuss how to support these recommendations, which include greater standards alignment and a UK-India data adequacy agreement, and in due course make it easier to do business between and in both countries.
In addition to the identified sectors, manufacturing will be a key sector for UK trade and investment and we at UKIBC have consistently advocated that the UK government amend visa policies to ensure that talented people from India can study, train and work in the UK. UKIBC has been particularly active in the area around the post-study working visa. India now receives more than half of all UK tier-2 working visas and the second most tier-4 study visas. The new UK Graduate Immigration Route for this year, which allows students to stay for up to two years post-study to find work, is a very welcome move and should help to attract Indian talent to the UK, and strengthen the living bridge between the UK and India.
Is an India-UK FTA expected soon? What are the possible areas of early harvest agreements?
The UKIBC has welcomed the governments’ shared ambition for a future FTA that came out of JETCO. The commitment to an Enhanced Trade Partnership is seen as a road map to such an agreement, starting, rightly, by focussing on market access issues and the ease of doing business.
The three priority sectors – food and drink, life science and healthcare, and digital and data services – are important starting points for such action.
So, the priority is to remove market access barriers and ultimately make it easier for businesses in the UK-India trade and economic corridor, with a view to a future FTA, and I think both governments are aligned to that view.
