India and the United Kingdom share a modern partnership bound by strong historical ties. The UK is the 6th largest investor in India and has invested USD 32.82 bn in FDI inflows between April 2000- September 2022. There are currently 572 UK companies in India with a combined turnover of USD 48 Bn and directly employing 416,121 people directly as of FY20. The range of sectors attracting investment from the UK has seen strong growth in education, retail, consumer goods, life sciences, healthcare, and infrastructure. India is the 2nd largest FDI contributor in the UK. Over 900 Indian companies operate in the UK that have generated a total turnover of USD 68.04 Bn, employed 141,005 people in 2022.
Even before India’s independence, UK companies, such as Britannia, Unilever, Oxford University Press, HSBC, Amalgamated Metal Corporation, British American Tobacco and GlaxoSmithKline, had made India their home and are household names even today. Investments of UK investors in India are mainly maneuvered through Foreign, Commonwealth & Development Office (FCDO) and British International Investment (BII).
Why are UK investments gain marketshare in India
India is the world’s fifth-largest economy and is forecast to surpass Germany and Japan to become the third-largest economy by 2030. The country’s significant population, large and growing middle class, and appetite for innovation makes India a market of near unparalleled promise, especially for UK infrastructure and industry firms. A few reasons to invest include:
- A rapidly growing middle class who favour UK services and exports.
- A strong and clear pipeline of infrastructure and manufacturing opportunities, many of which are open to foreign investment.
- A highly educated, motivated, and connected workforce.
- A position as one of Asia’s most important trade, finance and supply chain hubs.
- Deep, long-standing connections between the UK and India
Improved market access in India
The Indian market is diverse and comprises a complex set of smaller markets at the state level – business permits, regulations, income levels, tastes and norms of behaviour vary enormously. The Government of India has recently launched several business-friendly reforms to attract UK and international manufacturing companies. The country’s low labour costs, attractive incentives for new manufacturing enterprises and reduced corporate tax rates are expected to see India emerge as an alternative hub for global manufacturing.
Key findings to consider while investing in India:
- Leading investment destinations for UK companies are Maharashtra, Haryana, and New Delhi, followed by Karnataka, Tamil Nadu, Telangana, Gujarat, and Uttar Pradesh.
- Combatting the coronavirus pandemic has deepened trade and investment partnerships due to collaboration in research, design, and manufacture of vaccines. India also ensured UK’s access to its pharmaceutical products and equipment, such as surgical masks.
- Top UK companies by revenue in India include Vedanta (energy and power; Maharashtra), Vodafone Idea (telecommunication; Gujarat), Hindustan Unilever (consumer, retail, and e-commerce; Maharashtra); United Spirits (food and beverage; Karnataka), Ashok Leyland (automotive; Tamil Nadu), JCB (industrials; Delhi).
Local partnerships are critical to market entry in India. Industry partners with experience overcoming local market or compliance challenges can provide invaluable advice. They can also have strong personal networks to draw on for informal market insight and contact with officials. UK firms should look for an Indian partner with a complimentary business model ie. customer base, existing partnerships and long-term objectives. UK investors have to closely examine the environmental, social and governance credentials of any potential partner to ensure there is alignment in terms of business practices and ethical standards. Attracting local personnel for management functions comes with considerable
benefits. Companies should carefully assess whether to bring in foreign personnel
to manage operations
New policies to strengthen ties
In 2020, India announced the new National Education Policy, which allows leading global universities to operate in the country. The UK, as a hub for many renowned universities, and a top destination for Indian students can certainly see this as a favourable development. To strengthen this further, the UK and India have signed a Migration and Mobility Partnership.
This partnership also includes a Young Professional’s scheme that will make it easier for young Indian and British professionals to work and live in each other’s countries for two years. This is in addition to the new post-study graduate route that allows students to gain work experience in the UK for a stipulated period after completion of their studies.
Focus on sustainability
At the COP26 World Leader’s Summit in 2021, PM Modi made commitments to meet half of India’s energy needs through renewables and announced a 2070 net zero target. India and the UK can be ideal partners in this process through joint innovation and partnership in intelligent power, energy efficiency, offshore wind and electric mobility. The UK is also a part of the International Solar Alliance, led by India, to mobilise USD 1 trillion in solar investments by 2030.
Basis the increased market access provided by the Indian government to foreign investors and the high competency of the UK products, investors from the UK are receiving positive returns with a probability of continuing growth in the future.
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