India-UK FTA to increase India’s attractiveness as investment destination for large- and mid-market firms

Even as India and the UK are close to concluding talks on a free trade agreement, a new report has highlighted that the outlook for the India-UK corridor is positive, with many opportunities for growth and collaboration, particularly in the key sectors of technology and green innovation.

“India is becoming an increasingly attractive destination for investment due to its focus on ease of doing business, improving infrastructure, large and growing consumer market, sizeable skilled and young workforce and commitment to economic reform,” said the Britain Meets India 2023 by Grant Thornton Bharat and CII, which was launched on Thursday.

“An India-UK FTA will only increase India’s attractiveness as an investment destination for both large and mid-market companies,” it further said.

As per the report, the number of UK companies operating in India has risen to 635 with a turnover of £51 billion in 2023 from 618 firms with a turnover of £36 billion in 2022. These companies are incorporated in India and are owned or controlled directly or indirectly from the UK.

Nearly 6.67 lakh jobs were generated in 2023 compared to 4.66 lakh in 2022 by these firms. Technology is the most dominant sector for these firms in 2023 as against business services last year.

Pallavi Joshi Bakhru, Partner and India-UK Corridor Leader, Grant Thornton Bharat noted that the MSME sector plays a significant role in the corridor. The analysis shows that nearly two-thirds or 68% of UK companies in India are MSMEs.

Christina Scott, British deputy High Commissioner to India said the ambition is to double bilateral trade between the two countries by 2030 and expressed hope that this would get a boost from the agreement of the FTA, provided the conditions and package is right. “Conversations are going on,” she said but declined to comment further.

However, the level of engagement between the two countries will continue irrespective.

“Overall, an India-UK FTA will benefit the large and mid-market companies by removing tariffs, reducing barriers to trade, and creating new opportunities for collaboration and investment,” the report underlined.

It also highlighted that a survey of 608 mid-sized businesses in the UK by Grant Thornton UK found that two-thirds or 64% of businesses surveyed already had a business presence established in India.  Of these, 94% have plans to further expand their presence, with the majority citing plans to do so within the next two years.

“The survey also found that almost three quarters of those surveyed agree that an FTA with India will encourage their business to explore more opportunities there,” it said, adding that the key benefits for companies operating in India are India’s fast growing and stable economy, large working age population, and huge consumer market with a rising middle class who value ‘Brand Britain’ and British goods and services.

However, the survey also identified challenges to building a business presence in India. Whilst India has taken significant steps in ease of doing business led by economic reforms, those surveyed highlighted ease of doing business as a continuing challenge, it said.

The FTA also provides for a chapter on MSMEs. The FTA’s ‘Trade and Gender Equality’ chapter is the first of its kind which India has signed up for.

Gaitri Issar Kumar, former High Commissioner of India to the UK said that the FTA talks are “near the summit”, based on what she has heard. “The Indian side has gone beyond the normal template and is keen to make it a very comprehensive FTA,” she said.