A new industry-led report from the UK has found that British firms continued to invest around £140 million in India despite trade disruptions caused by Covid-19 between the months of April to June 2020.
Indian government reforms such as passing a key labour reform bill and plans for a new digital “one-stop shop” for firms applying for licences, clearances and incentives have helped British firms stay bullish on investments in the country, according to a new analysis. The 2020 Confederation of British Industry (CBI) and EY 'Sterling Access' report, which examines trade between the UK and India, finds that despite trade disruptions caused by the Covid-19 pandemic British firms from April to June continued to invest around £140 million in India. Overall, trade between the UK and India hit £24 billion till March 2020, up by nearly 12 per cent in just one year. India invested in 120 projects and created 5,429 new jobs - making India the second-largest foreign investor in the UK, just after the US.
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Lord Karan Bilimoria, the president of the CBI, which represents 190,000 British businesses, said: “The Indian government has hugely stepped up its efforts to improve the business environment this year, from accelerating the use of digital and online services in the supply chain to implementing major labour reforms.
“Building back from the economic shock of Covid-19, Prime Minster Modi has made clear his ambition for India to play a bigger role in the global supply chain. In order to accomplish this further progress will need to be made, adoption of global standards, reducing technical barriers and upping the momentum on a UK-India free trade deal will be critical,” Lord Bilimoria said that the report shows that UK-India relations have remained “ironclad” amidst the crisis with top universities and businesses collaborating on a Covid-19 vaccine and British firms continuing to invest heavily.
“As the fifth and sixth largest economies and the world's leading democracies, UK-India trade deal is a natural fit that has the potential to bolster our two-way trading relationship across many sectors including life sciences, IT and services,” he said.
The CBI report, jointly issued with professional services organisation Ernst & Young (EY), welcomes India's “ambitious” reforms agenda, which it notes is part of a “national challenge” to jump up the World Bank's 'Ease of Doing Business Index' and recommends actions which would speed up the reduction of trade barriers.
Some of these actions include:
a reduction in technical barriers to trade by adopting international standards and certification
formalising the new Joint Economic Trade Committee services working group
enabling growth of the insurance market by raising the foreign direct investment (FDI) limit from the existing 49 per cent to at least 74 per cent
implementation of labour reforms across all states
and developing new Special Economic Zones (SEZ) to support both manufacturing and services sectors.
The case for a new SEZ policy has been strengthened by the government's refreshed “make in India, for the world” or Atmanirbhar Bharat campaign, the report points out.
Adil Zaidi, Partner, Ernst & Young LLP, said: “The Second annual edition of this EY-CBI report is special as it also assesses government's response to our recommendations made last year and the on-ground impact.
“In this year's edition we have also tried to analyse how National Single Window and implementation of new labour codes will support the 'Atmanirbhar Bharat Abhiyan' and improve India's competitiveness as a preferred investment destination.”
Zaidi pointed to a new and better world order in the making, shaped by the pandemic, which will involve the relocation, and redeployment of capital across various parts of the world.
"The pandemic has provided a window to regulators to bring in new regulations, revisit the existing ones and also do away with some of them,” he said.
The CBI and EY say they interacted with key government officials in select Indian states where UK companies are located. This was done with support from the British Deputy High Commissions in virtual roundtable discussions and one-to-one interviews with members.
The Indian states covered include:
Maharashtra
National Capital Region
Karnataka
West Bengal
Tamil Nadu
The key recommendations come under the headings of Reform, Renew and Reset in the report, based on some direct feedback from the businesses on the ground.
Alan Gemmell, the India-based HM Trade Commissioner for South Asia, for the UK's Department for International Trade (DIT), said: “The UK and India are an unbeatable combination. Over 400 UK companies in India employ more than 450,000 people - and created 50,000 jobs within the last 2 years. 842 Indian companies in the UK with combined revenues of almost £48 billion employ more than 100,000 people.
“Overall trade between our countries hit £24 billion in 2019, up by almost 10 per cent in just one year and Britain has been the second fastest growing G20 investor in India over the last 10 years.
“The benefits of the UK-India partnership are clear: new jobs, economic growth and new avenues to co-create and co-innovate.”