India is one of the fastest growing economies in the world. It has a vibrant and expanding consumer market of over 1.2 billion people and is destined to be the world's third largest economy by 2030. This makes India an extremely attractive market with broad-ranging opportunities for United Kingdom (UK) exporters.

UK is the third largest investor in India. In recent times, India and UK have also launched the Free Trade Agreement (FTA) negotiations to facilitate the target of doubling bilateral trade by 2030. An India-UK FTA will unlock a new era of opportunities for both nations.

The two countries are aiming to secure an early harvest Interim Agreement by April 2022, in the run up to the comprehensive FTA. This will aim at reducing tariffs on goods and services which lead to duty-free access. The UK is pitching the India FTA as a major move since its exit from the European Union (EU), in support of free and fair trade in the Indo-Pacific. The launch of similar negotiations with Canada, Mexico and the Gulf are in the pipeline, besides membership of the GBP 8.4 trillion Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade bloc.
 

Benefits of a Free Trade Agreement

UK can prepare for India’s projected GBP 1.38 trillion import requirements

India’s import requirements are set to be worth GBP 1.38 trillion in 2035, improving access for companies across all sectors and regions of the UK, who can start preparing to provide for this demand. India-UK can augment their financial partnership with closer cooperation in fintech, ready-made garments and textiles, gems and jewelry, engineering goods, petroleum products, transport equipment, spices, pharmaceuticals, marine products, market regulation, and sustainable and green finance.

Britain exports precious and semi-precious stones, ores and metal scraps, engineering goods, chemicals, and machinery to India. In the services sector, the UK is the largest market in Europe for India’s IT services.
 

UK can double their exports to India, increase wages by up to GBP 3 billion

With the FTA, UK can double their exports to India and boost total trade by as much as GBP 28 billion a year by 2035 and increase wages across the UK by up to GBP 3 billion. Investment from Indian companies already supports 95,000 jobs across the UK. Freer trade with the UK will help India with greater access to a highly open and competitive market, offering valuable opportunities for India’s booming companies. Lower barriers coupled with greater regulatory certainty would incentivize new small and medium-sized enterprises to export their goods and services.
 

Govt. opportunities for businesses in India and UK

The progress so far in this direction includes - India has launched the ‘Green Grids Initiative – One Sun One World One Grid’ and ‘Infrastructure for Resilient Island States’ initiatives. India has also signed up for the Glasgow Breakthroughs and the Zero Electric Vehicles Declaration under the emerging economies category. To ensure the Glasgow Climate Pact, UK is committed to work with India to reach its goals. The Indian Government will facilitate British electric vehicle companies to set up their manufacturing hubs in India.
 

Boost India’s Overseas Direct Investment in UK

India’s overseas direct investment in UK since April 2021 to Feb 2022 Feb is USD 979 million. India has achieved the highest monthly value of merchandise export in March 2022, amounting to USD 40.38 billion, an increase of 14.53% over USD 35.26 billion in March 2021. India’s merchandise import in April 2021-March 2022 was USD 610.22 billion, an increase of 54.71%. The trade deficit in March 2022 was USD 18.69 billion, while it was USD 192.41billion during April 2021-March 2022.
 

Sectors for export-import collaborations 

An FTA between India-UK could boost protentional opportunities in various sectors:

Telecommunication:

The Telecom market was valued at USD 4.12 billion in 2020 and is expected to reach USD 22.52 billion by 2026, at a CAGR of 32.75% over the forecast period 2021-2026. Due to the proliferation of smart devices, M2M, Cloud Computing, 5G and electronics manufacturing demands of the telecom industry is increasing. It also includes artificial intelligence for Intellectual Property Rights (IPR), cyber and digital security. India’s digital transition presents a terrific opportunity for UK’s pioneering digital sector. The Government of India is aiming to have a trillion-dollar online economy by 2025.

Electronic:

The electronic packaging market was valued at USD 1020.13 million in 2020, and is expected to reach USD 2825.42 million by 2026, at a CAGR of 18.51% over the forecast period 2021-2026. The electronics segment is the largest sector due to the rising demand for products such as consumer electronics, renewable energy, automotive, digital infrastructure, strategic manufacturing components, medical electronics, etc. The emergence of modern technologies like artificial intelligence, machine learning, internet of things will create demand for new products.

Automotive:

The automotive market is estimated to grow at a CAGR of 5.6% from USD 153.5 billion in 2022 to USD 201.2 billion by 2027. The automotive industry is continuously evolving, with an increasing focus on semi-autonomous and autonomous vehicle technologies. There is a USD 4 billion sourcing opportunity for auto component manufactures in the UK. Companies based in the UK are primarily looking for UK based suppliers in segments like engine castings and forgings, steering systems, fuel tanks electronics, shock absorbers. Indian companies with their growing prowess in the area are well placed to take advantage of this.

CleanTech:

The Cleantech market is estimated to grow at a CAGR of 21.9% from USD 10.32 billion in 2020 to USD 74.64 billion by 2030. The electric vehicles, water and wastewater treatment are the other important market segments. It covers modern technologies that enable innovations in smart grid and energy storage, green transportation, energy efficiencies in cities, buildings and industries (smart technologies).

Pharmaceutical:

This market was valued at USD 7,322.44 million in 2021 and is growing at a CAGR of 5.7% over the forecast period 2022–2030. Medical and pharmaceutical products are the second largest category of goods the UK imported from India last year.

Healthcare:

This market is expected to reach USD 372 billion by 2022 in India. By FY22, healthcare infrastructure is expected to reach USD 349.1 billion. The e-Health market size is estimated to reach USD 10.6 billion by 2025. It also covers medical devices and digital health market opportunities in India.

Fintech:

The Fintech market opportunity is estimated to be USD 1.3 trillion by 2025, growing at a CAGR of 31% during 2021-2025. In India, there is an increasing demand for digital onboarding, lending, wealth management and technology around regulation, insurance and blockchain which translates as huge opportunities for UK exporters. Fintech plays a vital role in driving the post-pandemic recovery in both UK and India.

Energy:

The market size for energy is expected to reach USD 124.10 billion by 2028, exhibiting a CAGR of 9.9%. UK and India collaboration in this core area spans more than three decades and includes investment, research, policy, technical and commercial partnerships in the power, renewables, energy efficiency, civil nuclear, oil and gas sectors. India also wants to enhance photovoltaic cells manufacturing capacity with UK.

Technology:

So far in 2022 India’s technology industry has recorded a 15.5% growth (highest ever) to reach USD 227 billion in revenue. The India-UK tech partnership aims to bring together the best minds working in tech to support innovation and technology, unlock its future potential, deliver high-skilled jobs and sustainable economic growth. This pioneering partnership has dedicated support in both countries.

Biotech:

Globally, India ranks 12th in biotech destinations, with approximately 3% share in the global biotechnology industry. The Ministry of AYUSH, India and UK tied-up for a long project on ‘Ashwagandha herb’ in 2021. The Indian biotech industry comprises more than 2700 start-ups, which is expected to rise to 10,000 by 2024. Also, it is expected that by 2025 the Indian biotech industry will reach USD 150 billion.

Further, India harbours the best-in-class medical professionals and boasts of a population which is willing to cough up funds for the finest foreign-made technologies and technologically advanced devices such as cancer diagnostics, medical imaging, ultrasonic scans and others. India imports 80% of its medical devices which offers an opportunity for leading med-tech companies globally.
 

Conclusion

An FTA between India and UK has the potential to deepen economic and strategic ties. Further, a new economic partnership between India-UK and the huge Asia-Pacific trading bloc - Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) can create a pillar in the region supporting free and fair trade. UK wants an agreement that slashes barriers to doing business and trading with India’s GBP 2 trillion economy and market of 1.4 billion consumers, including cutting tariffs on exports of British-made cars and Scotch whisky. An FTA will also enable the UK to bounce back better from the pandemic, invigorating trade and investment services and stimulating growth throughout the country, while supporting the country’s wider ambitions of tilting towards the Indo-Pacific region and championing free trade.

A trade agreement with India will make trade easier and cheaper for UK exporters, whilst improving choice and value for UK consumers. The removal of tariffs and the provision of greater legal certainty by an FTA would support UK businesses in industries that are keen to export to India such as the automotive, agri-food, machinery, and pharmaceutical industries. An agreement also means UK manufacturers will be able to save costs by accessing cheaper parts for their products, whilst UK consumers would benefit from improvements in the variety and affordability of available products.

UK remains one of the largest G20 investors in India, investing an estimated cumulative total of GBP 21 billion. India’s bilateral trade hovers around GBP 23 billion.