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INDIA – UK: A Partnership of Equals

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A good political relationship between countries often results in strong economic bonds. This is true for the ties between the UK and India, says Sumeet Jain, Head of India-UK Desk, HSBC UK.

These nations share a long trading history, and their leaders are clearly committed to strengthening the bilateral relationship further with a UK-India Free Trade Agreement (FTA). Boris Johnson’s visit to India in April 2022 re-emphasised the British commitment. With four rounds of negotiations already completed and an intent from both countries, we can expect an agreement in some shape in the second half of this year.

On one hand, India aspires to become ‘aatmnirbhar’ (self-reliant) and be an alternate manufacturer for the world. It also understands that this manufacturing-led growth cannot be met without fulfilling its sustainable commitments. On the services side, the current surge of start-ups and entrepreneurs in India warrants capital backing to fulfil their growth ambitions. Some of these edtech, medtech and fintech firms also look to Western markets, not only to raise capital, but also to access those markets.

The UK is rapidly embracing green initiatives, generating and embracing sustainable technologies for its population. This expertise, technology and experience in Britain could aid India in meeting its own commitment to green energy.

Sumeet Jain | Head of India-UK Desk, London HSBC

The UK is a logical partner for India. India serves as an attractive option for British businesses who have interests over a broad spectrum of both medium and largescale businesses across manufacturing and services. UK companies not only need to diversify their supply chains, but also find alternative viable low-cost manufacturing options. A surge in India’s manufacturing ability creates a credible option. The UK is also home to some of the largest sponsors, private equity and venture fund firms who need opportunities such as those presented by India’s mid, large and start-up businesses to deliver growth to their investors. The UK is also rapidly embracing green initiatives, generating and embracing sustainable technologies for its population. This expertise, technology and experience in Britain could aid India in meeting its own commitment to green energy.

India and the UK are both major service economies. Services contribute around 71% of India’s GDP and 54% in Britain, and both countries have strong export markets. This represents an underlying opportunity for both to align their interests and learn from each other’s expertise and knowledge.

The service sector in the UK is not restricted to IT and Finance, but is quite broad based spreading across sectors like education, restaurants, pubs, hospitality, HR/payroll, consultancies and law firms. Key sectors within the captive outsourcing space in India that have seen keen interest from UK Companies have been in HR consultancy, payroll processing, CROs, software development or simply outsourcing admin and support functions. For the UK, India’s insurance and banking sectors are of significant interest and as the regulators try to make progress in easing access to capital, this will be a prime business opportunity for UK companies.

On the manufacturing side, one of the key benefits Indian manufacturers see is gaining from UK’s advanced technical know-hows in the renewable energy and electric vehicle sectors. Indian pharma, auto and IT companies are already contributing in a powerful way to the UK economy.

Companies in sectors like food and beverages, textiles, garments, engineering goods, technology and renewables have the potential to be the largest beneficiaries of the FTA. Both countries need to strike a mutually-beneficial, comprehensive agreement comprising goods and services, investment, and movement of people. A well-negotiated FTA will give both parties access to a large market, allow diversification of trade and supply chain and generate employment.

HSBC, by virtue of its dominant position in the UK market and its global presence, is uniquely placed to cater to customers whose businesses are international, especially in our mid-market and large corporate space. We already serve a number of customers who are trading between the two corridors of Britain and India, and the current UK-India FTA negotiation is sure to support new expansions in both directions.

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