How India can rely on the UK for growth in the post-Covid era
The UK and India are combatting the pandemic together, and it is just as important that they remain aligned when we emerge from this crisis.
“Friends in need are friends indeed” is an old adage. However, it has particular resonance in the times of the Covid-19 pandemic as the UK and India co-operate more closely. Both countries entered the lockdown and also relaxed the restrictions at the same time. Our governments are working closely on generic pharma exports, PPE and repatriation flights. Scientists at Oxford University, UK company Astra Zeneca and Pune-based Serum Institute are collaborating on the world’s most promising Covid-19 vaccine.
The UK and India are combating the pandemic together, and it is just as important that they remain aligned when we emerge from this crisis.
The Covid-19 pandemic has significantly affected global supply chains. Prime Minister Narendra Modi has responded by turbocharging his strategy for India’s development. But, is it the right strategy? And what does it mean for India-UK relations? It has been argued that Modi’s self-reliant narrative — Aatmanirbhar Bharat — hints at protectionism. Indeed, steps to exclude foreign companies from government contracts worth up to Rs 200 crore and to only sell India-made products in CSD canteens have been cited as evidence of protectionism. Yet, many UKIBC (United Kingdom India Business Council) members, clients and government contacts view that is that India is not turning inwards; rather, reforming to become more resilient to future shocks and to become a leader of the global economy.
In today’s globalised economy, India should continue to cooperate, collaborate, and celebrate its international networks to assume its role as a global leader. India has benefitted greatly since it began its integration into the global economy in 1991. It has made massive strides in opening its economy under PM Modi, evident in its unprecedented recent improvement in ease of doing business and being the world’s fastest-growing economy since 2014. Yet, Mr Modi was right to refresh his strategy in the light of current circumstances. Not just because the pandemic is realigning international relations including trade and investment ties, but also because India’s economic growth was slowing before the lockdown.
The UKIBC has advocated for many years that technology should be at the heart of the India-UK relationship. Mr Modi’s goal of India becoming the world’s next manufacturing hub offers the ideal opportunity for deepening India-UK collaborations as there is tremendous complementarity between our two advanced manufacturing ecosystems. UK manufacturers already have a large presence in India. Given the size and growth of the Indian and the wider Asian market, and advanced manufacturing supply chains becoming increasingly knowledge-intensive, India is well-placed to bag more investment. However, it will not happen automatically as the competition is intense.
So, what should India do to succeed? I would suggest four focus areas.
First, it is important that India remains open to imports — at competitive tariff rates, of technology and supply chain components.
It should deepen its regional trade and investment partnerships through the RCEP. This is important so that goods manufactured in India can flow freely with the ASEAN and other major Asian markets. I appreciate that this is easier said than done, because regional geopolitical tensions, including the current situation in the Galwan Valley, pose immediate barriers to an RCEP breakthrough.
Further effort to improve the ease of doing business is also critical. Mr Modi’s core focus on land, labour, laws and liquidity as priorities is also welcome.
Finally, India will have to secure a competitive edge by providing its ambitious young people with the skills of the future. It needs to do so by facilitating tighter collaboration between industry and the academia, including the UK’s R&D-rich universities that are keen to partner with Indian manufacturers and colleges.
With the UK now out of the EU, speculation about a UK-India trade deal persists. In my view, a comprehensive deal is not going to happen any time soon. However, businesses tell me that they would prefer smaller, incremental, trade agreements that remove tariff and non-tariff barriers. The Joint Economic and Trade Committee provides the framework, and for such agreements, I am hopeful that we will see success in the near future.
Given the political will in both countries and the enhanced cooperation to combat Covid-19, I am confident that over the next 12 months, we will see emerging a stronger, more self-reliant India. And we will see the UK by its side.