UK-India growth opportunities: More to do
As the UK and India hold their 13th Economic and Financial Dialogue (EFD) on April 9th amid a rapidly changing global economic and trade environment, Barclays is calling for both governments to urgently expand long-standing economic ties between the world’s fifth and sixth largest economies and demonstrate the continued value of bilateral economic cooperation.
In a new report, ‘Batting for Growth: The UK-India Economic Corridor’, Barclays shows that more can be done to capitalise on the strength of the existing UK-India economic partnership. Now is the time to accelerate progress; with the report identifying four key areas of focus:
- Trade: Over the last decade, India has been the UK’s fastest growing trade partner . Between 2021 and 2024, total UK-India services trade doubled from £12bn to over £24bn. Indian consumers show a strong preference for UK goods, and Barclays research shows they are willing to pay an average 11.8% premium for UK goods. Yet, UK companies are missing out on opportunities to expand into India due to a lack of awareness on how to enter the Indian market. Only 7.3% of UK exporters currently sell to India
- Investment: India has been the UK’s fastest growing investment partner over the last decade . Returns on investment are also high across the corridor. In 2023, India ranked as one of the UK’s top five most profitable destinations for outward FDI . Similarly, Indian investments into the UK from India were the second most profitable of any major inward investor into the UK. While the UK’s portfolio investment in India has risen rapidly, Indian portfolio holdings of UK assets remain relatively underweight. There are significant opportunities to strengthen two-way investment flows.
- Payments: Driven by trade, investment and people flows, data from Barclays’ Business Prosperity Index shows a substantial 18% increase in payments across the UK-India corridor between 2023 and 2024. However, frictions and compliance processes are preventing fully seamless payments which is impacting cross-border flows.
- Government mechanisms: The UK and India have put in place several mechanisms for ongoing economic co-operation but some of these are held irregularly.
The report shares policy recommendations for the UK government to capitalise on these opportunities:
Trade:
- Finalise a UK-India Free Trade Agreement: The UK and India should accelerate negotiations to achieve a Free Trade Agreement (FTA). The UK government should also look to improve the ease of trading with India, embracing digitalisation and electronic trade initiatives.
Investment:
- Deliver a modern and ambitious UK-India Bilateral Investment Treaty (BIT): Following the termination of the previous BIT in 2017, the UK and India should deliver a new treaty to deepen investment flows. This treaty should incorporate both FDI and portfolio flows, minimise the number of sector carve-outs to areas related to national security, and simplify regulatory and legal steps.
- Build awareness and understanding of each other’s markets: The UK government should find more systematic ways for UK politicians and senior officials to consistently engage with large Indian businesses, and both countries should publicly showcase business success stories of their companies entering each other’s markets.
- Work with India’s GIFT City to explore how to deepen two-way portfolio flows: India’s GIFT City is an ongoing project to build an international financial services centre in India. Given India’s efforts to build out infrastructure across the country, and the need to deepen capital markets, both the UK and India should work with GIFT City to unlock greater cross-border investment flows.
- Incentivise wealth flows: In light of recent changes to the UK’s tax regime on non-UK domiciled individuals, the UK should refresh its offer of non-tax benefits to promote High Net Worth Individuals (HNWIs) – including Indian HNWIs – expanding their investment in the UK. Other countries provide examples of similar measures. For example, the US offers HNWIs a ‘gold card’ and the UAE has an expedited business registration process.
Payments:
- Reduce friction in the UK-India payments corridor: The UK government should work with Indian authorities to minimise compliance barriers, share information and promote understanding of payments-related regulatory regimes. This should create momentum for a longer-term focus on working towards real-time payments and interoperability with India’s Unified Payments Interface (UPI).
Government mechanisms:
- Ensure consistent and robust implementation of existing government mechanisms that facilitate economic cooperation: Confirm that established mechanisms are still relevant and that there is follow through from government forums to business in order to accelerate commercial activities.
This paper coincides with the UK-India EFD held in London by UK chancellor Rachel Reeves and India’s minister for finance Nirmala Sitharaman.
C S Venkatakrishnan, group chief executive of Barclays said: “The UK has a deep and long-standing economic relationship with India. This year’s UK-India Economic and Financial Dialogue marks a new phase of the important partnership between our two countries.
Barclays has over 29,000 colleagues in India and a robust business, domestically and connecting Indian enterprises to the world. Barclays’ latest report provides recommendations to strengthen trade and investment between India and the UK, deepening and broadening our close ties, and driving growth in our economies.”