The forthcoming visit of the UK Prime Minister Mr. Boris Johnson to India was set to give a renewed thrust to India-UK bilateral ties; however, the visit, scheduled for end April, was called off for the time being due to the COVID situation.
As earlier planned, the two countries are working on a ‘Roadmap 2030’ for enhancing the future of the economic partnership, that will focus on reenergizing trade and investment relations along with climate action.
India and the UK have shared long standing, historical ties that have further intensified over the years through greater engagement and high-level visits and was upgraded to a Strategic Partnership in 2004.
The India-UK partnership reached new heights, with PM Modi’s visit to the UK during November 2015, that aimed at deepening cooperation between the two sides, specifically in the areas of defence and security. A joint statement on Energy and Climate Change cooperation was also endorsed during the visit.
With the departure of the UK from the EU in January 2020, India has been a priority country for the UK, as Brexit opened up several new avenues for both sides for bolstering bilateral ties, given that UK alone accounted for a large percentage of Indian exports to the EU bloc.
Further, the Covid-19 crisis which has heightened the importance of diversifying trade baskets, trade strategies and establishing newer partnerships, strategically places UK as an important partner for India. India and the UK together, as large trading partners have the potential to significantly influence global trade dynamics and play a key role in restoring the economic balance in the post-Covid era.
On the trade front, UK is India’s top 14th trading partner as per estimates released by the Ministry of Commerce, as of April-January 2020-21 period. On the other hand, India is UK’s top 23rd export partner and top 20th import partner.
Over the last ten years, bilateral trade between the two sides has increased significantly.
During 2010-11, total trade between the two sides stood at US$ 12.7 billion, which increased to around US$ 17 billion in 2018-19, before moderating at US$ 15.45 billion during 2019-20. The recent decline in trade was primarily an outcome of the resulting lockdowns imposed to contain the spread of the Covid-19 pandemic, that largely disrupted international trade flows.
Over the five-year period between 2015-16 and 2019-20, total trade between India and UK recorded a CAGR of 1.96 %, while the CAGR over the entire ten-year period between 2010-11 and 2019-20 stood at 2%.
India-UK Bilateral Trade in the last 10 years (US$ billion)
In terms of investment, the UK is India’s sixth largest investor with a cumulative investment of more than US$ 30 billion between April 2000 and December 2020, that accounted for around 6% of total foreign direct investment (FDI) flows to India. India is also one of the leading foreign investors in the UK.
During the pandemic, the two sides have continued to collaborate with each other, especially in the areas of vaccine research and manufacturing. With the Indian Government undertaking major reforms, especially in the areas of ease of doing business, India’s growing middle class and a talented workforce, the country is positioned as one of the most preferred investment destinations for UK businesses.
Both sides, however, have significant untapped potential in the areas of trade and investments. As per a CII analysis, 52 products at the HS 6-digit level have high potential for exports from India to the UK. The top potential export items are in the categories of fuels, drugs, vehicle parts, and gems and jewelry.
This is an opportune time for resuming trade and investment negotiations and address other issues in the areas of defence, security and the Indo-Pacific region, that will upgrade the bilateral relationship further.
Earlier, the UK had expressed interest for expanding cooperation in other areas as well including financial services, cyber security, green finance, fintech and insurance. Thus, the upcoming summit meet is a great opportunity for both sides to take further steps into securing a bilateral trade deal, that will open up ample prospects for both.
However, there are issues to be addressed, including concerns regarding reaching a consensus on tariff and non-tariff barriers. Import duties on wines and automobiles continues to be a concern from the UK’s side. On the other hand, for India, movement of Indian professionals to the UK will be a priority, especially in terms of greater access and granting of UK visas for workers as well as students.
With many prospects arising for both India and the UK in the post-Brexit scenario, the time is right to move towards a closer partnership. Both Industry and the respective Governments of both sides will play a key role in addressing concerns and taking the partnership forward. It is to be hoped that the visit of the UK Prime Minister to India can be fructified at the earliest.