UK-India bilateral trade ties have strengthened in manifold ways in the wake of the Coronavirus pandemic. From the extensive collaboration on a Covid-19 vaccine between Oxford University and the Serum Institute of India to the announcement of an Enhanced Trade Partnership at last month’s Joint Economic Trade Committee, the two countries are paving the ground for a potential Free Trade Agreement (FTA). Until last year, trade between the two countries was growing at 17% per annum and the figure is expected to grow by even greater amounts as both countries work towards an FTA.
The UK India Business Council, a member-led advisory group, is an instrumental intermediary supporting British businesses operating in India and vice versa with insights, networks, policy advocacy, services, and facilities in the UK and India. Richard Heald, Chair Designate of UKIBC, speaks to Asian Voice about the prospects of a UK-India FTA, the revival of the British economy and supply chains in a post-Covid world and the significance of Indian companies driving growth in a post-Brexit UK.
FTA: Reduction in tariffs and a 150% duty on whisky imports
“While an FTA is a very important goal for both countries, UK-India bilateral trade is already increasing year-on-year under the existing umbrella of the World Trade Organisation (WTO) agreement. Are there areas where we would like to see changes in tariffs that would come through an FTA? “Yes” For example, in India, there is a 150% duty on whisky imports and it is not exempt from Goods & Services Tax (GST). So, an FTA clearly will be helpful for both parties in getting rid of such high levels of duty.
“But achieving an FTA is a long-drawn process and the UKIBC is currently very focused on establishing a greater conducive working atmosphere for those UK companies that are already operating in India.
“There are 500-600 UK companies sourcing, manufacturing or assembling goods and produce in India. They employ around 800,000 people and represent about 5% of India’s organised sector. What matters to these businesses is the ease of doing business and the operating environment. Accordingly, UKIBC is pushing on the elements which will increase the amount of activity and employment (and hence taxes paid) represented by these companies in India. Life sciences and
healthcare, the food and processing industry and the digital market are areas where we would like
greater relaxation of norms,” he said.
According to the World Bank Group’s Doing Business 2020 report, India has jumped 14 places in the last year in their Ease of Doing Business list, to be ranked 63rd among 190 countries. Since 2000, total FDI from the UK to India has totalled more than £22 billion, and the UK has been the largest G20 investor in India in the last decade. While 2020-21 would have ideally recorded a continuing upward tick in the figure, Covid-19 has disrupted global supply chain systems and has called into question previous international trade networks.
Covid-19 chokes global supply chains and multi-national trade
The transport, hospitality and tourism industries were the immediate victims of “lock-down”. Food and healthcare industry also grappled with the pandemic as Multi-National Corporations sought alternative solutions for sourcing raw ingredients as well as shortening or localising supply chains.
“Covid-19 will have a profound impact in shaping global businesses especially concerning the development and maintenance of the extensive supply chain systems. In the future, I believe we will see simplification and localisation of supply chains. Therefore, whether we will have as much multi-national trade flow as we did before coronavirus? It remains to be seen.
“UK companies can, however, play a vital role in establishing proper food channels and storage or warehouse facilities in India. UK companies are interested in supporting India’s food-commerce industry and in streamlining the subcontinent's unorganised food industry.
“After Covid-19, I believe that there will be a greater emphasis on the organised sector with a growing consumer awareness around ethical produce and increased reliance on consumption of products approved by the Food Safety and Standards Authority of India (FSSAI).”
Combatting unemployment and job generation
While the UK companies in India contribute to the Agri-Tech and Food & Beverage Industry, technology and service-oriented Indian companies will have a crucial role in reviving the British economy. Hundreds of Indian companies in the UK such as Tata JLR and Infosys have created 110,793 jobs as of May 2020, according to the ‘India Meets Britain Tracker 2020, collated annually by Grant Thornton and the Confederation of Indian Industry (CII). These companies will be vital for the creation and sustenance of British jobs in a Covid-19 environment at a time when paid employment is already reported to have plunged by 650,000 people.
The speculation around the closure of Tata’s two blast furnaces to electric furnaces at Port Talbot has created much concern amongst Union workers. Tata alone employs 3,500 at Port Talbot and the company is reportedly in negotiation with the UK Government for a multi-million pound coronavirus bailout.
Citing examples of some Indian powerhouses who have swum against the coronavirus tide, Richard said, “Ola’s impact and expansion in the UK has been exponential in the wake of the pandemic. There has been a long-standing interplay between Uber and Ola since late last year. And in a Covid-19 environment, more Londoners would prefer an Ola as opposed to the Tube considering the safety element. Essar Energy through its Stanlow Refinery in Liverpool has made a direct difference in boosting up the UK’s refining capacity. TVS Supply Chain Solutions, part of the TVS Group, again is
one of the most advanced solution providers across the UK.”
Evolution of MedTech
Covid-19 has also enabled a platform for greater collaboration in the healthcare industry between UK and India. British-Swedish company AstraZeneca has already tied up with the Serum Institute of India for the manufacturing of a potential Covid-19 vaccine being developed by Oxford University. Wockhardt has recently announced a fill-and-finish arrangement with the UK Government to supply Covid related vaccines and medicines. While India extended 3 million packets of paracetamol to the UK during the height of the pandemic, Prime Minister Johnson has indicated his desire to reduce the
UK’s heavy reliance on the import of Chinese drugs and medical supplies. Perhaps, it is an indication that the MedTech sector would see a relative boom in Foreign Direct Investment (FDI) from Indian Pharmaceutical companies. And increased investment flows from existing UK Big Pharma companies in India.
Speaking about India as an alternative to China, Richard said, “One of the advantages that India has in comparison to China is the increasing penetration of drugs and vaccines in the UK especially in terms of supporting the NHS. The export of paracetamol in the UK during the Covid-19 pandemic was very well received. And pharma companies like Cipla, Wockhardt have achieved record growth levels in the UK. Enabling the UK and India to collaborate more effectively will be of benefit to both countries. At JETCO, the joint working groups set out a series of recommendations to achieve that, for example through alignment in standards, and we will support businesses and both Governments in these areas.
“But I believe it is the wrong question to ask whether one should invest in India or China. Businesses should look at the relatives of operating in both countries and the governments must facilitate not dictate the processes. The governments should create an operating environment and the businesses must look at the cost of production and returns in both countries in particular industries and make a decision accordingly.”
