As the pandemic recedes, British investors are exploring India as an additional manufacturing location with a China +1 model, rather than fully dislocating from China, said Jayant Krishna, Chief Executive Officer of the United Kingdom India Business Council (UKIBC), in an exclusive interview with Moneycontrol.
After initial hesitations over the government's Aatmanirbhar Bharat policy being a protectionist move, UK firms now feel it would lead to greater integration of India’s economy with the rest of the world. More investments by British firms in sectors ranging from pharmaceuticals, defence and engineering to higher education may be the result, Krishna pointed out.
In fact, 2020 saw a sharp uptick in interest from British investors exploring the Indian market, he added.
As trade talks between both nations intensify, the CEO stressed that incremental reforms, meaning the removal of market access issues, removal of barriers to trade and improving the ease of doing business remain crucial for British businesses. On the other hand, it would also provide a boost to investments into the UK from India, already the second largest among nations, he added.
Has there been a movement in British investment flows in favour of India since the start of the Coronavirus pandemic, when New Delhi stated its intention of pulling global supply chains and companies operating in China towards India?
Certainly, we’ve experienced an uptake in interest from British investors exploring the Indian market in the last year. Perhaps the pandemic has contributed to that, but I think even more strongly that it is more to do with the growing Indian market, the improving ease of doing business, and the opportunity that a country of 1.3 billion people and a large workforce brings. It is difficult to estimate now how many British firms are considering shifting from China to India. As a matter of fact, rather than absolute dislocation, firms have been exploring having India as an additional manufacturing location with a China +1 model. But I would say that India is an extremely attractive country to invest in its own right. Recent reforms in labours laws, schemes like PLI and improved ease of doing business augur well for India as a manufacturing destination.
How do British businesses view the ‘Aatmanirbhar Bharat’ policy being espoused by India?
At first British businesses, like all international onlookers, were somewhat sceptical of the Aatmanirbhar Bharat mission. India has achieved so much since opening its markets to the world in 1991 and we strongly believe that continuing to do so will be to India’s advantage. Yet, over time and with reassurance from figures such as Prime Minister Narendra Modi himself, Finance Minister Nirmala Sitharaman and others, it is becoming increasingly clear that this is not a protectionist step. Instead of isolation, Aatmanirbhar Bharat would lead to greater integration of India’s economy with the rest of the world. In fact, the UKIBC’s Doing Business in India Survey found that the majority (77 percent) of UK companies surveyed think that Aatmanirbhar is an opportunity for more investment in India.
As the pandemic and its effects slowly subside, which are the sectors in India that are generating the most interest?
The UK and India share a commonality of manufacturing excellence and that is one area of interest certainly. Of course, Mr Modi has long pushed to make India a global manufacturing hub, and even more so since the pandemic as India and other countries look to develop stable supply chains. UK firms want to be part of that, and furthermore have the manufacturing, engineering and research excellence to support. Other areas include infrastructure, defence and pharmaceuticals. In addition, higher education has seen a sharp rise in interest from British universities for a couple of reasons, one to attract Indian students to come to study in the UK, and the second, the opening up of the sector for foreign universities to set up campuses and courses in India, most significantly under the new National Education Policy 2020. We at UKIBC have long pushed this as we believe British universities can truly help India to educate its massive population which will take great effort and resources.
Considering that the UK is in the process of signing enhanced bilateral trade pacts with a host of nations, how important is India in the UK’s plans of engagement in a post-Brexit world?
India is quite an important part of the UK’s post-Brexit world. In the last 12 months alone, the UK’s Secretary of State for International Trade Liz Truss met with her counterpart Piyush Goyal, Minister for Commerce & Industry several times and there has been a noticeable step up in the engagement and enthusiasm on both sides. Everybody knows of the long history and culture UK and India have shared. Now that the UK has formally left the EU, it is looking to foster its engagement with nations based on their complementary needs, skills and markets. At such a juncture, India is very complementary, bound by shared language, democratic institutions, a huge diaspora; we are similar-sized economies, and both value the importance of key global issues like climate change, and even both nations playing key roles in the worldwide vaccination rollout.
As both nations get ready to hammer out an early harvest trade deal, which are the sectors in focus for UK businesses?
There are several sectors but the three priority ones for the Enhanced Trade Partnership – food and drink, life science and healthcare, and digital and data services – are an important starting point and rightfully the focus. Take life science and healthcare for instance. The COVID-19 pandemic has laid bare the necessity of all countries to have suitable healthcare and the importance of international governance and collaboration that encourages sharing of knowledge, expertise and best practices to generate better outcomes for all involved. That means having the necessary infrastructure, medical equipment, and drugs to meet demands. The joint venture between Oxford University, AstraZeneca and the Serum Institute of India on one of the world’s leading vaccines is an illustration of the great things that the UK and India can achieve together.
It was earlier felt that a Free Trade Agreement was not a priority for British businesses in India as much as the smaller, more incremental reforms. Has there been a change in that position?
Look, there is no doubt that in both the UK and India there is a willingness to do more trade. Free Trade Agreement (FTA) is surely the eventual goal. Right now, the focus is still on incremental reforms, meaning the removal of market access issues, removal of barriers to trade and improving the ease of doing business. We are consistently working with both the Governments and with businesses to better those. It’s worth noting though that the Enhanced Trade Partnership is seen as a roadmap to a future FTA.
Conversely, what does an Indian business stand to gain if it were to invest in Britain right now?
An Indian business would gain access to the UK’s regulatory and legislative environment, highly skilled workforce, top-grade R&D capabilities and one of the largest economies in the world, similarly sized to that of India. The UK also has the lowest corporate tax rate amongst the G7, and business supportive measures announced as recently as March 3, 2021, by the UK Chancellor Rishi Sunak including a new unsponsored points-based visa to attract the best international talent in science, research and tech and a ‘super deduction’ tax scheme to incentivise investments. What’s more, the UK is home to an Indian diaspora of over 1.5 million. Let us not forget, India is already the second-largest investor in the UK with large footprints from groups like Tata, Essar, TVS and many others.
Competing nations like Ireland and Netherlands continue to pitch themselves to Indian businesses as potential alternatives to the UK, given their continuing access to European markets and the relative economic volatility of a Post-Brexit Britain. Your comments on this
It is true that Ireland and the Netherlands throw worthwhile investment opportunities while providing access to the European Union. However, for the reasons outlined earlier, the UK remains an attractive country in its own right. Also, the new EU-UK Trade and Cooperation Agreement set out preferential arrangements in areas such as trade in goods and in services, digital trade, IP, public procurement, aviation, road transport, energy, etc. The EU-UK Trade and Cooperation Agreement goes far beyond the traditional free trade agreements and provides a strong basis for honouring their longstanding friendship and cooperation. Therefore, the setback perceived earlier when UK made an exit from the EU has largely been addressed and overcome.