High Commission of India London (Economic & Commerce Wing) Brief on India-UK Bilateral Economic Relations

Transcription

1 High Commission of India London (Economic & Commerce Wing) Brief on India-UK Bilateral Economic Relations I. Background: India-UK Economic and Commercial Relations The visit of UK Prime Minister Theresa May to India from November 6-8, 2016 was designed to further strengthen the India UK Strategic Partnership, guided by a shared vision for the future and supported by a concrete and comprehensive roadmap of bilateral and global engagement. The two Prime Ministers discussed all aspects of India-UK relations. The two leaders recalled the strong bonds of friendship that exist between the two countries characterised by extensive political engagement, deep economic co-operation, and everexpanding scientific and technological collaboration. The two prime ministers noted the importance of the UK-India trade relationship and welcomed that business to business ties between India and the UK are flourishing. India was the third largest investor in the UK and the second largest international job creator with Indian companies having created over 110,000 jobs in the UK. The UK is the second largest G20 investor in India. At the last India-UK summit held in London on November 12, 2015, the Prime Ministers of both India and UK agreed to continue working towards strong, sustainable and balanced growth, and agreed on the importance of structural reforms and pursuing credible fiscal policies in order to raise living standards. The two leaders hailed the strength of the economic partnership between India and the UK: India already invests more in the UK than in the rest of the EU combined, and the UK is the second largest G20 investor in India. Both sides committed to further strengthening the economic relationship, including through deepening the bilateral trade and investment relationship. India-UK Summit 2016 Trade and Economic Engagement UK Prime Minister Theresa May made her first bilateral visit to India during November 6-8, On November 7, 2016, Prime Minister of India Narendra Modi held delegation-level talks with the UK Prime Minister Theresa May and both the Prime Ministers released a Joint Statement of the India-UK Summit in New Delhi. The 2 prime ministers noted the importance of the UK-India trade relationship and welcomed that business to business ties between India and the UK are flourishing. They noted that India was the third largest investor in the UK and the second largest international job creator with Indian companies having created over 110,000 jobs in the UK. The UK is the second largest G20 investor in India. The 2 prime ministers expressed their pleasure at the level of bilateral financial co-operation and called for greater participation of the investment community from both sides in stimulating Indian and UK economic growth. The leaders welcomed the large number of commercial deals finalised in connection with the visit, across a range of sectors: ICT companies, critical engineering and healthcare products. Over 30 British businesses, including small- and medium-sized enterprises from every region of the country accompanied UKPM s first trade mission to India in November billion worth of business between UK and Indian companies were signed to coincide with the visit of UK Prime Minister.

2 Financing India s infrastructure growth On June 30, 2017, Rural Electrification Corporation of India (REC) launched its first green bond, at London Stock Exchange which will be admitted to trading on London s International Securities Market (ISM). The ten year dated green bond raised $450 million, with an annual yield of per cent. The bond was 3.9 times oversubscribed on the final order book and secured strong international investor interest, with Asian investors making up 68 per cent of the order book and investors from the EMEA region making up 32 per cent. first green bond in London Around $ 3 billion (INR 19,700 Crore) of rupee-denominated bonds have been issued, of which $2 billion (c. INR 15,800 Cr) are listed in London in establishing London as the leading global center for offshore rupee finance. The highly successful bond issuances by HDFC and NTPC will pave the way for Indian corporates to raise significant quantities of finance in London. On May 12, 2017, NTPC listed its 2nd 5-year Masala Bond in the new innovative debt market, International Securities Market (ISM). The current issuance is the 1st Medium- Term Notes (MTN) and 1st Masala Bonds to list on ISM. The first Masala Bonds issuance in August 2016 was for Rs crores (US$ 300 million) as is the current one (US$310 million). Both the Masala Bonds are of 5 years tenor. The latest Masala Bonds 2017 carry a coupon of 7.25% payable annually with reoffer yield of 7.28% (tightest yet by any Indian Issuer). On May 12, 2017 National Highways Authority of India [NHAI] celebrated the issuance of its Masala Bond at the London Stock Exchange. The bond raised INR 3000 crore at a price yielding 7.30% annually. It was listed on 18 th and this issue saw new investors from this region who were not previous investors in Masala bonds. The Canadian Province of British Columbia celebrated the issuance of its Masala Bond on the London Stock Exchange, the first foreign Government entity to issue such a rupeedenominated bond in the Indian offshore market. The British Columbia bond raised INR 5 billion (c. $75 million) with 6.62 per cent semi-annual yield, securing high quality investor support from across Europe, Asia and America. Indian Railway Finance Corporation (IRFC) and Indian Renewable Energy Development Agency Limited (IREDA) has also plans to issue rupee-denominated bonds in the next few months. An agreement to create the FTSE-SBI India Bonds Index Series will support the development of India s growing corporate bond market. This follows a successful collaboration between State Bank of India (SBI) and London Stock Exchange Group s index business FTSE TMX. India and the UK announced the launch of an Early Market Engagement for the joint UK- India Fund, namely a Green Growth Equity Fund which aims to leverage private sector investment from the City of London to invest in green infrastructure projects in India. Both governments reaffirmed their commitment to anchor invest up to 120 million each (i.e. totally 240 million) in the joint India-UK Sub fund which will be established under the NIIF framework. To begin with, the fund aims to raise around 500 million, with the potential to unlock much more in future. It was announced that the initial investments will focus on India s rapidly growing green energy and renewable market and that a Fund Manager is expected to be selected in the next few months. Progress will be accelerated through early market engagement via the publication of a blueprint, with the aim to identify additional and complementary sectors for fund investments.

3 India-UK CEOs Forum During the visit of UK Prime Minister to India in November 2016, the reconstituted India-UK CEOs Forum was held on November 7, 2016 at New Delhi. The Forum agreed with Prime Minister Modi s assessment that the UK-India relationship currently stands at an inflexion point, which offers great opportunities, in which the Forum believed it could play a leading role. Highlighting the achievements of the Forum s working groups, three reports were launched at the meeting: Smart Cities and the Digital Economy; Financial Inclusion, and Responsible Shareholder Engagement. Looking forward, the Forum agreed to develop activities in the existing work streams in The Forum agreed to: Promote the creation of a UK-India Advanced Materials and Manufacturing Technology Centre Submit a paper recommending ease of doing business measures that will facilitate greater UK manufacturing engagement with India Facilitate collaboration between UK and Indian start-ups by linking incubators at Indian higher education institutions with incubators in the UK. Work in a number of healthcare-related areas, including Swachh Bharat, medical training, and pharmaceuticals. New initiatives were also considered, including in renewable energy, hospitality and tourism, and regulatory capacity building. The recent India UK CEOs Forum was held on 16 th June 2017, in London. The Forum discussed the following issues: Introduction on Trade and Investment market access issues : - Bilateral Investment Treaty - Food and Drink - Digital Economy - Low carbon economies - Defence, manufacturing and security Work stream updates: - Start-ups - Smart City Infrastructure - Financial and Professional Services - Digital Economy - Tourism and Hospitality - Defence, Manufacturing and Security - Investment Facilitation for UK

4 MoU between the UK and India on Ease of Doing Business An MoU between the UK and India on Ease of Doing Business was signed during UK PM s visit to India in November 2016 which set out how the UK and India would work together to share expertise and best practice and will harness UK expertise to support India s efforts to climb the World Bank Ease of Doing Business ratings. MoU between UK Intellectual Property Office and Department of Industrial Policy and Promotion A Memorandum of Understanding (MOU) was put together by the UK Intellectual Property Office (UK IPO) and the Department of Industrial Policy and Promotion (DIPP), during the visit of the UKPM to India in November This will help enhance bilateral cooperation on a range of IP related activities. For example: o exchanges of best practice in the field of IP, for example, streamlining the processing of registrations for patents, trademarks and designs o technical exchanges which can involve supporting enforcement authorities and assisting mechanisms for the judicial resolution of IP disputes o outreach activities including business advice on how to value and secure IP o education campaigns to increase awareness and respect for IP for the general public MoU between India and the UK to allow more flights to boost tourism and trade for both the countries On February 9, 2017, an MoU was signed between India and the UK to ease restrictions on the number of scheduled flights between the two countries, The agreement was formally signed by Minister of Civil Aviation, Shri Pusapati Ashok Gajapathi Raju, on behalf of India and Lord Ahmad of UK during his visit to India. Limits on flights from key Indian cities including Chennai and Kolkata have been scrapped, allowing for a greater range of flights for passengers while providing a boost to trade and tourism for the UK and India. Building new links with important trading partners is a key part of the government s plans for a Global Britain, opening up new export markets and creating jobs and economic growth. The agreement also opened all destinations in the UK for Indian carriers for code share flights, and reciprocally the UK carriers can also operate code share flights to any International Airport in India, through domestic code share arrangements. II. Bilateral Institutional Mechanisms: 1. India-UK Joint Economic and Trade Committee (JETCO) The JETCO was established on January 13, 2005 to develop a strategic economic relationship following the Joint Declaration India-UK towards a new and dynamic partnership between former Prime Ministers of the two countries in September The JETCO has been conceived as a business driven institutional framework to enhance trade and

5 investment between the two countries. Establishment of the JETCO gave a vibrant upward direction in the India-UK economic partnership. The JETCO delegations meet annually under the leadership of the Minister of Commerce and Industry (CIM) and the Secretary of State for International Trade alternating in both capitals. The 11 th ministerial meeting of India UK Joint Economic and Trade Committee (JETCO) was held on 7 th November, 2016 in New Delhi. Commerce & Industry Nirmala Sitharaman co-chaired the 11 th India-UK JETCO along with UK Secretary of State for International Trade, Liam Fox. Both sides reviewed the progress held in the two existing Joint Working Groups i.e. Smart Cities" and "Technological Collaboration, Advanced Manufacturing & Engineering" under the aegis of JETCO. The two sides decided to create a new Joint Working Group on Trade to discuss and resolve trade related issues. The second JWG meeting on Trade was held on March 28, 2017 by video conference. 2. India-UK Economic and Financial Dialogue (EFD) The India-UK Economic and Financial Dialogue (EFD) was officially established in February 2005 through signing of an agreement between former Finance Ministers of the two countries. This was in pursuance of the proposals set out in the India-UK Joint Declaration signed by the Prime Ministers of India and UK in September The objective of the Dialogue as reflected in the agreement is to strengthen the financial and economic relationship between India and the UK, in the light of each country s economic policy agenda and within a global economic perspective. Among other issues, the Dialogue will discuss sustainable economic development, structural reforms, reform of financial systems and markets, improving regulatory frame-works and international development. UK delegation led by UK Chancellor of the Exchequer Philip Hammond visited India to participate in the 9 th round of the Economic & Financial Dialogue (EFD) between India and the UK on April 4, Both Finance Minister Arun Jaitley and Chancellor discussed how notwithstanding the UK s triggering of Article 50, India and the UK can work together to: strengthen the existing economic partnership in order to further boost trade and investment and; build on the bold vision for the India-UK Strategic Partnership set out by both the Prime Ministers during UK Prime Minister s November 2016 visit to India. The Dialogue covered discussions on Global economy and policy responses, Trade and investment, Improving the business environment, Financial services relationship, Financing India s growth and Developments in FinTech. The joint statement of 9 th India UK EFD is available on During the 9 th India-UK EFD, India and the UK announced the launch of an Early Market Engagement for the joint UK-India Fund, namely a Green Growth Equity Fund which aims to leverage private sector investment from the City of London to invest in green infrastructure projects in India. Both governments reaffirmed their commitment to anchor invest up to 120 million each (i.e. totally 240 million) in the joint fund which will be established under the NIIF framework. To begin with, the fund aims to raise around 500

6 million, with the potential to unlock much more in future. It was announced that the initial investments will focus on India s rapidly growing green energy and renewable market and that a Fund Manager is expected to be selected in the next few months. Progress will be accelerated through early market engagement via the publication of a blueprint, with the aim to identify additional and complementary sectors for fund investments. Details are available on 3. India-UK Financial Partnership (IUKFP) The India-UK Financial Partnership was launched at the 7 th India-UK Economic and Financial Dialogue held in Delhi on July 8, Shri Arun Jaitley, Finance Minister of India and Rt. Hon. George Osborne, the then Chancellor of the Exchequer welcomed the deepening of Financial Services links between the two countries and said that the partnership will strengthen links between the Financial Services industries of both countries and deepen cooperation between London and Mumbai, two of the World s leading Financial Centres. Mr Uday Kotak, Executive Vice Chairman and Managing Director, Kotak Mahindra Bank and Sir Gerry Grimstone, Chairman, Standard Life were appointed as co-chairs of the IUKFP representing India and the UK side respectively. It was decided that the Partnership would focus on the following work-streams: Development of corporate bond market Mutual sharing of expertise on financial sector and market regulation Enhancing financial training and qualification Financial inclusion Cross-border provision of financial and insurance services Pensions Internationalization of the Rupee Infrastructure funding The last meeting of the India-UK Financial Partnership was held on April 4, 2017 on the side-lines of 9 th India-UK EFD in New Delhi. Both governments welcomed the impressive progress by the India-UK Financial Partnership (IUKFP), under its co-chairs Mr Uday Kotak and Sir Gerry Grimstone, since its establishment as part of the 2014 Economic and Financial Dialogue. The two Finance Ministers recognised the success of this government initiated and private-sector led partnership in deepening links between our countries and generating commercial opportunities for both sides. Both sides welcomed the publication of further reports on financial inclusion, responsible shareholder engagement, rupee internationalisation and green finance. The Finance Ministers also agreed to renew the IUKFP s mandate and looked forward to future papers on bank restructuring, fintech, disinvestment, India-UK trade and investment relationship recommendations from financial and professional services and ease of doing business in financial and professional services. Recognising the crucial role of insurance and reinsurance to manage complex risks in the economic system, the UK and India welcomed the opening of Lloyd s of London s first Indian branch to underwrite re-insurance business. Both sides also agreed to work to boost cooperation and collaboration between the regulatory authorities and industries in both countries to foster sharing of best practices. Both sides recognised the importance of developing strong pension systems, agreeing that India and UK can share experiences in this area.

7 Indian Ministerial visits to the UK in 2017 Minister of State (Independent Charge) for Power, Coal, New & Renewable Energy, Government of India, Shri Piyush Goyal, visited the UK on May During the visit, the Minister witnessed listing of NTPC Bonds at London Stock Exchange. The Minister chaired the investors meet organised by LSE and FICCI that aimed at deeper engagement infrastructure and clean energy financing, issues of easing of regulatory mechanism, green energy bonds, masala bonds and inflation linked tariffs were also discussed. The Minister also highlighted the improvement in energy efficiency in LED bulbs. The Minister also launched UJALA (Christened as UK Joins affordable LEDs for all), Energy Efficiency Services Limited (EESL) s affordable lighting scheme, and introduced the innovative Pay as you Save business model in UK. Minister for Road Transport & Highways, Nitin Jairam Gadkari visited the UK during May 11-13, 2017 to launch the National Highways Authority of India s [NHAI] issuance of its Masala Bond at the London Stock Exchange. During the visit, the Minister met with the officials of Transport for London (TFL) on Transport Development. The Minister also participated at the UK-India Conclave on May 12, Ministry of Textiles Secretary Rashmi Verma visited the UK during April 3-4, 2017 for a Road Show in London to give wide publicity to Textiles India 2017 event scheduled to be held in Gujarat from June 30 to July 2, Commerce Secretary Rita Teotia visited the UK to attend the inaugural Commonwealth Trade Ministers Meeting in London on 9-10 March Finance and Corporate Affairs Arun Jaitley visited London during February 24-28, During his visit, FM delivered a talk at London School of Economics on Transforming India: Vision for the Next Decade. FM also performed the Market Opening Ceremony at London Stock Exchange followed by a Roundtable Meeting with prospective issuers and leading investors and fintech leaders among others. FM also had a Business interaction with over 100 senior business leaders from the UK-India Business Council (UKIBC). During the visit, FM attended a reception hosted by Her Majesty, the Queen at Buckingham Palace on the occasion of India-UK year of Culture. FM also met with CEOs at a meeting organized by the Confederation of British Industry. During his visit, FM called on The Rt. Hon Boris Johnson, Foreign Secretary and Rt. Hon. Philip Hammond, Chancellor of the Exchequer. During the visit, FM also interacted with investors of JP Morgan. FM also attended a Reception hosted by FICCI, British Council and High Commission of India. UK Ministerial visits to India in 2017 UK s Secretary of State for Defence Sir Michael Fallon visited India for the India-UK Strategic Defence Dialogue during April The visit reaffirmed and consolidated UK-India defence cooperation in the framework of the Defence and International Security Partnership, agreed in November 2015, and the subsequent Joint Statement between the Governments of India and the UK in November The UK s Secretary of State for Business, Energy and Industrial Strategy, Greg Clark visited India on April 6-7, 2017 to attend the inaugural India-UK Energy for Growth Dialogue.

8 During the visit, SoS held bilateral meeting with Minister for Power, New & Renewable Energy, Coal and Mines, Piyush Goyal. On April 4, 2017, the Chancellor of the Exchequer Philip Hammond led a high level Fintech delegation to India for the 9 th India-UK Economic & Financial Dialogue (EFD), alongside the Governor of the Bank of England Mark Carney and government ministers, including the Commercial Secretary Baroness Neville-Rolfe and International Trade Minister Mark Garnier. Minister for Defence Procurement Harriett Baldwin led the UK delegation consisting of 20 companies at the aerospace exhibition held at Air Force Station Yelahanka from February 13-18, Parliamentary Under Secretary of State for Transport Lord Ahmad of Wimbledon led a delegation of British companies for the 2017 CAPA India Aviation Summit on February 9, During his visit, an MoU was signed between India and the UK to ease restrictions on the number of scheduled flights between the two countries. Foreign Secretary Boris Johnson visited New Delhi and Kolkatta during January 18-19, 2017 to set out the UK s vision for a Global Britain and a strengthened relationship with in a keynote speech at the Raisina Dialogue. III. India UK Trade and Investment 1. India-UK Bilateral Investment The UK is now the 4 th largest inward investor in India, after Mauritius, Singapore and Japan with a cumulative equity investment of US $ billion (April March 2017). UK now ranks second among the G20 countries and accounts for around 7% of all foreign direct investment into India for the period April 2000 March I. Investments from UK to India Cumulative FDI Inflows from UK (April March 2017) : US $ billion Percentage share of FDI inflows into India from UK : 7% Rank : 4 th FDI from UK during the last 7 years US$ 2.7 billion US$ 7.8 billion US$ 1.0 billion US$ 3.2 billion US$ 1.4 billion US$ 898 million US$ 1.2 billion

9 II. Investments from India to UK According to the latest Inward Investment Result released by the Department for International Trade on August 30, 2016, India retains the position as 3 rd largest investor in the UK. India also emerged as the 2 nd largest international job creator in UK. The US remains the biggest source of inward investment, accounting for 570 projects, followed by China with 156 projects and India with 140 projects. Indian companies created 140 FDI projects in the UK in , and created 7,105 new jobs and safeguarded 344 jobs. According to Office for National Statistics, The value of Indian FDI into the UK has experienced a notable increase between 2004 and 2013, from 164 million to 1.9 billion. The largest industry grouping in the UK receiving Indian FDI was information and communication (30% of total UK FDI into India in 2013). The UK attracts more Indian investment than the rest of the EU put together. According to the Grant Thornton India Tracker 2017 Report, More than 800 Indianowned businesses, employs nearly 110,000 people in the UK. The top fastest-growing companies in the India Tracker 2017 achieved an average annual growth rate of 31%. The total consolidated revenue for 800 Indian companies operating in the UK is 47.5 billion. The technology and telecoms sector continues to dominate the India Tracker, making up 31% of the list. The pharmaceutical and chemicals sector, accounting for 24% of the list, retains second place, while the business services sector enters the top three for the first time at 11%. Capital expenditure by Indian companies in the UK reached a staggering total of 4.25 billion. 2. India-UK Bilateral Trade UK is among India s major trading partners. During , UK ranked 16 th in the list of India s top 25 trading partners. Despite the global economic slowdown and the Eurozone crisis, India-UK bilateral trade has been resilient. India-UK Total Trade Statistics as on 08/06/2017 Values in US $ Millions S.No. \Year EXPORT 8, , , , , %Growth India's Total Export 300, , , , , %Growth %Share IMPORT 6, , , , , %Growth India's Total Import 490, , , , , %Growth

10 10. %Share TOTAL TRADE 14, , , , , %Growth India's Total Trade 791, , , , , %Growth %Share TRADE BALANCE 2, , , , , India's Trade Balance - 190, , , , , According to the data published by the Department of Commerce, Government of India, two-way merchandise trade during stood at US$12.22 billion, marking a decrease of 12.81% as compared to India s merchandise exports to UK declined by about 3.04% from US$ 8.82 billion in to US$ 8.56 billion in and imports from UK have declined by 29.42% from US$ 5.19 billion in to US$ 3.66 billion in UK s share in India s global trade has gone down from 2.18% in to 1.85% in As per UK s Office for National Statistics, India-UK bilateral trade in services in the year 2015 amounted to 4.9 billion. India's exports to the UK in services in the year 2015 amounted to 2.60 billion and India's imports from the UK in services in the year 2015 amounted to 2.29 billion. As per UK s Office for National Statistics India-UK bilateral trade in goods and services in the year 2015 amounted to billion. ***** 10 July 2017