Indo-United Kingdom Economic Relation

India was a British colony for over 200 years till it achieved independence from the United Kingdom on August 15, 1947. India and UK’s trade relations have undergone a massive change from the colonial period. Once perceived as a less developed country, India had transformed itself into the fastest growing economies of the world currently. It is not hidden that India is world’s fourth largest economy in purchasing power parity terms and UK is the 4th in GDP dollar terms.

TRADE

India was a British colony for over 200 years till it achieved independence from the United Kingdom on August 15, 1947. India and UK’s trade relations have undergone a massive change from the colonial period. Once perceived as a less developed country, India had transformed itself into the fastest growing economies of the world currently. It is not hidden that India is world’s fourth largest economy in purchasing power parity terms and UK is the 4th in GDP dollar terms.

TRADE

UK, which remained at second position in India’s leading trade partner till 2002, has become India’s fifth leading partner last year. Countries like china, UAE and Belgium have taken 2nd, 3rd and 4th position resp.
India exports to UK are textiles and readymade garments, gems and jewellery, footwear, leather and leather goods, engineering goods, metal manufactures, power generating equipment, software services, pharmaceuticals, chemicals, marine products, rice, tea and other agricultural products like nuts and preserved fruits and vegetables.

India’s imports from the UK include: non-ferrous metals, gold, rough diamonds, power generating and telecom equipment, transport equipment, industrial machinery and chemicals.Looking from UK’s perspective, India was UK’s 15th largest export market, and the UK’s largest exporting market in the developing world (ahead of China). Among the countries where bulk of UK’s import come from, partners, India is the 25th largest exporter to the UK.

INVESTMENT

UK is ranked at number 5 in the total FDI inflows to India. However, the FDI amount has declined in the last 2 years from 366 US $ million in 2000-01 to 167 US $ million in 2003-04.
Top sectors for UK FDI to India are currently power and oil and gas, telecom, and service industries. Keen to see more cooperation in biotech, healthcare, pharmaceuticals, automotive and other ICT and hi-tech areas. UK is committed to attracting even more high-quality Indian companies in the knowledge-based sectors to set-up in Britain.

Recent years have also seen a surge of investments into the UK from India, particularly in the IT sector. India is now the second largest investor in the UK from Asia in terms of number of projects, and the eight largest overall. The number of Indian businesses investing in the UK has increased by a dramatic 47% in 2003-4 over the previous year. According to the Figures published by UK Trade & Investment, 28 new companies from India invested in the UK in 2003-2004, bringing the total number of Indian companies in the UK to 480. Of this 338 are from the Information and Communications Technology (ICT) Sector. They include flagships for Indian ICT such as Tata Consultancy Services (TCS) and Wipro. Reliance Infocomm’s $207 million acquisition of Flag Telecom and Wockhardt’s £10.85 million acquisition of CP Pharmaceuticals were among the two largest Indian investments in 2003. But a majority of the other investments continue to be in the IT sector.

Additionally, leading Indian biotechnology companies are collaborating with clients across the UK and Europe. Astra Zeneca has established an R&D Centre in Bangalore. GlaxoSmithKline and Ranbaxy have signed an agreement for joint research and development. Industry delegations from both countries have visited each other regularly.

Similarly, leading British oil and gas companies, including British Gas, Shell and Cairns Energy, have announced plans to expand their operations and increase their investments in India. An increasing number of British companies are moving to India for setting up IT and BPO operations.

UK presence in India is best noticed when we talk about the Information Technology sector in India. India, which has become the preferred global hub for software development and Business Process Outsourcing, has attracted attention from many UK companies. While there are fears of job losses on account of outsourcing to India, the reality is that the UK economy is growing strongly and the employment situation, including in call centres, has never been better.

OTHER ECONOMIC LINKAGES
Besides, trade and investment, UK’s department for international development (DFID) supports the Government of India in its efforts to achieve the poverty reduction objectives of the Government of India’s Tenth Plan and the internationally agreed Millennium Development Goals (MDG’s). DFID’s spending in India for the financial year 2005/06 is expected to be £280 million. The institution aims to develop strategic programme at the national level as well as supporting programmes in its four partner states: Andhra Pradesh, Madhya Pradesh, Orissa and West Bengal. 45% of DFID’s total assistance to India was disbursed through national programmes. These national programmes include the District Primary Education Programme (DPEP), health interventions (AIDS, TB, Polio) and direct financial support to the activities of several partner agencies, including the ADB, World Bank and number of UN organisations.

Trade and investment ties have been continuously strengthened by several bilateral interactions between the two countries. One such linkage is the India-UK Round Table, a non-governmental body set up in 2000 to make recommendations on development of bilateral relations in all spheres. The 7th Meeting was held in Kolkata on January 10, 2004.

Last year August, an agreement was signed between India and UK named as “The Prime Ministers’ Initiative,”set out a new strategic partnership between the UK and India, which among other areas like education, culture foreign and Defence Policy, aims to strengthen bilateral economic and trade issues between the two nations.