Shared history won’t keep India-UK business afloat

Thursday, August 26, 2010 | Posted by: Fiona Cullinan
Categories: India | Tags: business, India, statistics, report, data, UK, BBC, David Cameron, news, trade, India Economy, Divya Baweja

Trade friction means that India and the UK shouldn’t rely on historical ties to keep deals afloat but should focus on feeding their mutual interests. What the two sides have to offer each other in the global economy was the subject of a recent report by BBC India.

Watch: BBC’s India Business Report for the full story, shown in July/August 2010 during Prime Minister David Cameron’s trade visit.

In the report, Divya Baweja, Partner, Grant Thornton India, says:

“What is important is to see which are the key sectors where there is a need for India to develop… so maybe one could look at the key development areas where the focus should be for India and similarly for the UK. The Government should look at talking on those areas and see how we can try to relax [Foreign Direct Investment] laws so they can be used for the benefit of both countries.”

There is a huge amount of interest in India at present. As much as the UK wants new markets for its exports, India is also seeking growth through M&A activity here in the UK. 

But the report notes that although India shares a history and a natural familiarity with UK in terms of language and culture, there is friction between the two countries: the UK wants the rules softened to offer better market access for UK retail and other firms, while India finds the UK’s new cap on visas equally restrictive for its IT sector.

“Lately, UK as an economy has closed its gate to Indian entrants because of visa requirements,” says Divya Baweja. “This restriction is likely to dampen the spirit of investors insofar as the UK is concerned and this policy may need a revisit.”

Background and statistics to the UK-India trade relationship

• India has close links with the UK both in terms of inbound investment and outbound investment.
• Trade and investment flow between the UK and India continues to expand.
• The UK is by far the most popular business destination in Europe for Indian companies.
• Also, the UK is the largest European investor in India and the fourth largest internationally (after Mauritius, Singapore and the US) with £3.87 billion of foreign direct investment in 2008.
• The two biggest global acquisitions originated from the UK: Vodafone acquiring Hutch Essar (£7.3 billion) and Tata’s acquisition of Corus (£8 billion).
• Bilateral trade between India and the UK was £11.5 billion in 2009 and £ 12.6 billion in 2008.

*Source: BIS Economics & Statistics Directorate

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* India Watch Issue 9 – released in July 2010, there are updates on share prices falling on environmental concerns, the Indian economy’s performance, cross border M&A deals and volumes, investment opportunities and new areas for growth. You can also sign up to receive India Watch by email.