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IOD Special Talk - Strengthening Ties & Embracing Opportunities

By- Institute of Directors | Authored by- M. Nagaraju, IAS


India’s Role in Global Trade and Collaboration with the UK

I am thrilled to discuss India's evolving role in global trade, the growing value chain linkages with partners such as the UK, and our ambitious vision for the future.

We meet at a time when world trade is undergoing a profound transformation. Nearly every major company is reconfiguring supply chains for mitigating risks, enhancing resilience, and seizing new opportunities for growth. Alongside, countries are re-evaluating their trading partnerships based on economic and national security concerns.

India's Position in Global Trade

India, as one of the world's largest and fastest-growing economies, is uniquely positioned to shape and benefit from the evolving global trade landscape. As of today, India ranks as the fifth-largest economy, supported by its robust domestic market and a dynamic workforce. India's real GDP registered a growth of 8.2% in fiscal year 2024, posting a higher growth for the third consecutive year. Supported by optimism surrounding India's growth story, robust trade volumes, strategic global partnerships, and progressive policy reforms, India is integrating more deeply into the international economy.

India has long been recognised for its strengths in sectors like pharmaceuticals, textiles, IT, and engineering. Apart from these traditional sectors, emerging sectors such as renewable energy, digital technology, healthcare, and infrastructure also present promising avenues for growth and international collaboration.

In recent years, India's trade has undergone remarkable growth. With a target to reach $2 trillion in exports by 2030, India's export strategy is focused on enhancing market access through Free Trade Agreements (FTAs), boosting productivity, and scaling innovation. By 2023, India has entered into 19 regional trade agreements with various countries, including 13 Free Trade Agreements and 6 Preferential Trade Agreements. Additional agreements with the UK, EU, and other regions are under negotiation, all aimed at expanding access for Indian goods and services globally.

From innovation in green technology to collaboration in high-tech sectors – the continued commitment of our two nations to sustainable growth and innovation will serve as the cornerstone of a prosperous future.

India-UK Trade and Investment Partnership

The relationship between India and the UK is a prime example of a strong, mutually benefiial economic partnership. India, as the fastest-growing major economy, offers a unique combination of a vast consumer base, a young workforce, and an innovation-driven mindset. The UK, on the other hand, is known for its leadership in financial services, green technology, and cutting-edge innovation.

The sectors in which we collaborate pharmaceuticals, energy, defence, agriculture, IT, and professional services are each emblematic of our strengths and also reflect the avenues through which our economies increasingly intersect. It is this alignment across diverse sectors that allows us to work together not only as trade partners but as equal stakeholders in each other's success.

A Record in Trade

The numbers are a testament to our growing partnership. In 2023-24, bilateral trade between India and the UK reached USD 21.34 billion, a 5% increase from the previous year. This growth reflects our commitment to economic cooperation and our desire to push this trend further.

The UK remains a crucial export market for India, ranking as the sixth largest destination for Indian goods, with a 3% share in our total exports. Remarkably, India's exports to the UK grew by 13.3% year-on-year, a statistic that underscores the resilience and demand for Indian products in the UK market. On the import front, the UK holds significant importance, with imports growing steadily and making the UK an essential partner in India's international trade matrix.

Our service sectors are equally well-aligned. India is the UK's fifth-largest source of services imports, accounting for 4.3% of the UK's total services imports. This includes IT services, where India's immense pool of tech talent contributes to the UK's thriving digital and innovation sectors. With the Migration and Mobility Partnership Agreement in place, we have laid the groundwork for expanding this services relationship, allowing our talented professionals to contribute more significantly to each other's economies.

Bilateral Investment Inflows

Beyond trade, investment flows between India and the UK are at an all-time high, reflecting the trust and mutual benefit that define our relationship. The UK ranks as the sixth-largest investor in India, with cumulative Foreign Direct Investment (FDI) inflows exceeding USD 35 billion between April 2000 and March 2024. The presence of more than 600 UK companies in India speaks volumes. These

companies, with a combined turnover of £51 billion, directly employ nearly 6 lakh people and are spread across sectors such as petroleum, ports, roads and highways, and IT.

Equally, India's footprint in the UK is growing robustly by being the second-largest source of FDI in the UK, with more than 970 Indian companies operating across the country. As per a statistic, together, these companies generate revenues of over USD 68 billion and create nearly 1.2 lakh jobs, fostering innovation, economic growth, and sustainable development in the UK.

A significant portion of these investments are in green technology, sustainable energy, and other climate-conscious initiatives. Indian firms, in alignment with both our nations' commitments to sustainable development, have made substantial investments in the UK''s transition to a greener economy. This alignment reaffirms our shared values of economic and environmental responsibility.

Government Reforms

Our governments have been pivotal in facilitating this collaboration. India's focus on improving the ease of doing business and enhancing infrastructure has made the country a welcoming environment for foreign investors. Key reforms, such as the PM Gati Shakti, National Master Plan, and the National Logistics Policy, reflect India's commitment to creating seamless business operations. Our efforts have been validated by India's six-position jump to rank 38th on the World Bank's Logistics Performance Index, highlighting our commitment to improving connectivity, logistics efficiency, and business operations across the country.

Moreover, the Government of India's Production Linked Incentive (PLI) Scheme has catalysed substantial investments in manufacturing. This scheme, aimed at integrating India further into global supply chains, has attracted nearly Rs. 1.32 trillion in investment and boosted manufacturing output by Rs.10.9 trillion. UK companies have already benefitted from this initiative, and we look forward to fostering more UK investments under the PLI framework.

Investment Synergy

India's economy, projected to grow at 7.0%, is driven by a young workforce and rapid urbanization, fueling demand across retail, e-commerce, and infrastructure sectors. These sectors offer vast opportunities for UK businesses aiming to expand internationally. Further, India's infrastructure sector, backed by a $1.4 trillion investment target, calls for expertise in urban infrastructure, transport, and renewable energy. The UK's experience in sustainable infrastructure development aligns well with India's priorities in this space.

Key Collaborative Sectors: Expanding Opportunities

As we look to the future, several sectors stand out as prime areas for enhanced collaboration:

1. Financial Services and Fintech:
India's fintech sector, projected to reach $150 billion by 2025, represents a dynamic frontier. The rapid growth of digital banking and digital payments, supported by an expansive middle class and rising digital adoption, creates fertile ground for UK investors. UK expertise in digital banking, cybersecurity, and financial technology can play a transformative role in shaping India's financial landscape, while India's vast consumer market offers unprecedented opportunities for UK fintech solutions.

GIFT City, India's pioneering International Financial Services Centre, provides a strategic entry point for UK businesses in financial services. As India's first IFSC, GIFT City offers a unique mix of advanced infrastructure, regulatory flexibility, and tax incentives, designed to foster international partnerships. UK firms, particularly in banking, reinsurance, and green finance, can leverage GIFT City's environment to expand their South Asian footprint and participate in India's economic growth.

Additionally, the ongoing Free Trade Agreement (FTA) negotiations are expected to simplify cross-border data flows and enhance regulatory standards, creating a more seamless environment for financial services collaboration.

2. Infrastructure and Urban Transformation:
India's ambitious National Infrastructure Pipeline, with its $1.4 trillion investment target by 2025, is set to transform the nation's urban and transport infrastructure. The UK, with its advanced capabilities in infrastructure engineering, project management, and sustainable design, can significantly contribute to these projects. Our high-speed rail projects and regional metro systems offer UK firms unique entry points to share their expertise and be part of India's infrastructure story.

3. Green Technology and Renewable Energy:
The push for renewable energy is a shared priority for India and the UK . India's commitment to renewable energy, with over 200 GW of capacity and ambitious targets to reach 500 GW of non-fossil fuel capacity by 2030, aligns well with the UK's expertise in green technology. Together, we can drive meaningful change through collaborative investments in areas like green hydrogen, solar energy, and sustainable energy infrastructure.

Our partnership in green technology is not only an economic opportunity but a moral imperative. By working together, India and the UK can set an example for the world in combating climate change and promoting sustainable development.

4. Healthcare and Life Sciences:
India's role as a leading supplier of pharmaceuticals and medical technology opens avenues for UK companies specialising in healthcare solutions. The Indian healthcare sector's rapid growth, driven by rising incomes and a strong R&D base, provides UK businesses with opportunities to introduce innovative products, expand manufacturing, and address health challenges that transcend borders.

5. Digital Public Infrastructure:
India's leadership in Digital Public Infrastructure, with initiatives like Aadhaar, UPI, and DigiLocker, has set a benchmark for efficient digital ecosystems. This infrastructure has simplified transactions and improved access to public and financial services. UK businesses have an excellent opportunity to leverage India's digital frameworks to expand financial services, ecommerce, and digital engagement, tapping into one of the most dynamic digital markets globally.

Roadmap 2030: A Vision for the Future Our bilateral relationship is not just about addressing present needs; it is a shared vision for a prosperous future. The India-UK Roadmap 2030 sets a 10-year vision for deeper cooperation in trade, investment, climate change, healthcare, and more. At the heart of this roadmap lies the Enhanced Trade Partnership, with a commitment to double our bilateral trade by 2030. The ongoing FTA negotiations are a crucial step toward achieving this vision, as they will lower trade barriers, expand market access, and unlock new opportunities for collaboration in high-tech, digital, and sustainable sectors.

Conclusion: A New Era of Partnership I would again reiterate that the economic relationship between India and the UK is a story of shared success and immense potential. The UK is a critical market for Indian exports, and India offers a vast, dynamic market for UK businesses to thrive.

As we look toward the future, the landscape of our global economy is rapidly evolving, and our partnership will continue to adapt and grow. From innovation in green technology to collaboration in high-tech sectors, the opportunities are boundless the continued commitment of our two nations to sustainable growth and innovation will serve as the cornerstone of a prosperous future.

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Author


M. Nagaraju, IAS

M. Nagaraju, IAS

Secretary, Department of Financial Services, Ministry of Finance, India

Owned by: Institute of Directors, India

Disclaimer: The opinions expressed in the articles/ stories are the personal opinions of the author. IOD/ Editor is not responsible for the accuracy, completeness, suitability, or validity of any information in those articles. The information, facts or opinions expressed in the articles/ speeches do not reflect the views of IOD/ Editor and IOD/ Editor does not assume any responsibility or liability for the same.

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