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 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 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, 2016. On November 7, 2016, Prime Minister of India Narendra Modi held delegationlevel 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 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 2016. 1.2 billion worth of business between UK and Indian companies were signed to coincide with the visit of UK Prime Minister. 1
Financing India s infrastructure growth Over $1.1 billion (INR 7,500 crore or 900 million) of rupee-denominated bonds have been issued in London since July 2016, establishing London as the leading global centre 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. 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. National Highways Authority of India [NHAI] and Indian Railway Finance Corporation [IRFC] have 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 Russell. India-UK Sub-Fund under the National Investment and Infrastructure Fund (NIIF) will seek to leverage private sector investment from the City of London to finance Indian infrastructure projects under the umbrella of the NIIF. It is hoped that this will initially raise around 500 million and has the potential to unlock much greater investment flows in the future. 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 2017. 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. 2
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 2016. 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 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 2004. The JETCO has been conceived as a business driven institutional framework to enhance trade and 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. 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 2004. 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 3
Dialogue will discuss sustainable economic development, structural reforms, reform of financial systems and markets, improving regulatory frame-works and international development. Indian delegation led by Shri Arun Jaitley, Minister of Finance visited the UK to participate in the 8 th round of the Economic and Financial Dialogue (EFD) between India and the UK on January 19, 2016. The 8 th India-UK EFD co-chaired by the Finance Minister and Rt Hon George Osborne, the then Chancellor of the Exchequer, explored new areas of cooperation in financial services sector. The Dialogue covered discussions on Global Economic Challenges, Macroeconomic Risks and Policy Responses, Infrastructure Finance and Financial Services. A joint statement was issued after the successful completion of 8 th India UK EFD. 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, 2014. 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 Co-Chairs of the India UK Financial Partnership (IUKFP), Mr. Uday Kotak and Sir Gerry Grimstone called on Finance Minister Arun Jaitley on November 7, 2016 to appraise him on progress of the partnership and presented the two most recent papers on Financial Inclusion and Responsible Shareholder Engagement An Indian Stewardship Code. Notable visits from India to UK in 2016 Shri Shivraj Singh Chouhan, Hon ble Chief Minister of Madhya Pradesh visited the UK from September 26-28, 2016. Shri Dharmendra Pradhan, Minister of State (I/C) for Ministry of Petroleum & Natural Gas Government of India visited the UK from September 11-15, 2016. 4
Smt. Harsimrat Kaur Badal, Minister of Food Processing Industries, Government of India visited the UK from September 5-8, 2016. Shri Chaudhary Birender Singh, Minister of Steel, Government of India visited the UK from August 27-31, 2016. Dr. Harsh Vardhan, Minister for Science & Technology and Earth Sciences, led the Indian delegation at the 5 th Indo-UK Science and Innovation Council Meeting (SIC) held at London on June 15, 2016. Shri Piyush Goyal, Minister for Power, Coal, New & Renewable Energy visited London on April 19-20, 2016 to strengthen India-UK collaboration on power and renewable energy. The Minister was accompanied by an official delegation which included Secretary, Ministry of New and Renewable Energy, Joint Secretary, Ministry of New and Renewable Energy, Director (Technical), IREDA and a 9 member business delegation. During the visit, the Minister held bilateral meetings with Lord Bourne, the then UK Minister for Energy and Climate Change, Lord Jim O Neill, Commerce Secretary to the Treasury and Mr. Nick Hurd, the then Minister for Department of International Development. The Minister also participated at an Investors Round Table on Renewable Energy organised by the Confederation of Indian Industry, a Roundtable on Financing for Renewables and Energy Efficiency at the City of London Corporation and an Investors Meet at the London Stock Exchange. Smt Nirmala Sitharaman, Minister of State for Commerce & Industry, Government of India visited the UK on March 31, 2016. During the visit, The Minister met with Rt Hon James Brokenshire, the then Minister of State for Immigration to express concerns about the UK Government s intention to accept recommendations of UK Migration Advisory Committee (MAC) on reviews of Tier 2 visa policy. Shri N Chandrababu Naidu, Chief Minister of Andhra Pradesh visited the UK on March 11-12, 2016. Shri Debi Prasad Mishra, Minister for Industries and School & Mass Education, Government of Odisha visited the UK during February 03-09, 2016. Shri Arun Jaitley, Minister of Finance, Corporate Affairs and I & B, Government of India visited the UK during January 17-19, 2016 for the 8 th India-UK Economic & Financial Dialogue (EFD). The Minister was accompanied by Shri Ajay Tyagi, Additional Secretary (Investment), Shri S. Selvakumar, Joint Secretary (ABC), Mr. Harun Rasid Khan, Deputy Governor, Reserve Bank of India and Shri Simanchala Dash, PS to the Minister. The Minister attended the India-UK Financial Partnership CEOs luncheon meeting held at 11, Downing Street. UKIBC, Goldman Sachs, MasterCard, London Stock Exchange and Kotak Mahindra Bank / Confederation of India Industry. The Minister also had a separate interaction with select group of Persons of Indian origins (PIOs) associated with India-UK businesses. UK Ministerial visits to India in 2016 UK Prime Minister Theresa May made her first bilateral visit to India during November 6-8, 2016. UKPM led a business delegation of 40 British companies on her first overseas visit to India. 5
UK Secretary of State for International Trade, Liam Fox visited India from 6-10 November, 2016 to take forward the India-UK collaboration across trade, business, skills and entrepreneurship. He participated at the India-UK TECH Summit (7-9 November, 2016), alongside the UKPM. The Minister also co-chaired the 11 th India-UK Joint Economic & Trade Committee (JETCO) along with Minister of Commerce & Industry Nirmala Sitharaman on November 7, 2016. Secretary of State for International Development Liam Fox visited India from August 28-30, 2016. Secretary of State for International Development Priti Patel visited India from August 12-14, 2016. Secretary of State for Business, Energy and Industrial Strategy Greg Clark visited India on August 10, 2016. UK Minister for Asia, Alok Sharma visited India on July 24, 2016. The then Secretary of State for Business, Innovation & Skills Sajid Javid visited India on July 8, 2016. Rt Hon Hugo Swire, Minister of State, Foreign and Commonwealth Office visited India on May 30, 2016 to build on the successful visit of Indian Prime Minister to the UK in November 2015. Lord Mayor of the City of London Jeffrey Mountevans visited India from March 18-23, 2016 as part of the UK s commitment to boosting economic ties between the two countries. Sir David King, UK Climate Change Envoy visited India from March 15-17, 2016 to strengthen UK-India collaboration on energy and climate. Ms Harriett Baldwin, Economic Secretary to the Treasury and Mr Alok Sharma, the UK Prime Minister s Special Envoy visited India from February 15-18, 2016 to promote the UK s flagship collaboration with India on infrastructure financing. Mr James Brokenshire, the Immigration Minister visited India on February 16 2016. Mr Philip Dunne, the UK Minister of State for Defence Procurement visited New Delhi on Thursday February 18, 2016 to boost the India-UK defence security partnership. Rt Hon Priti Patel UK Minister for Employment and UK Prime Minister s Indian Diaspora Champion visited Ahmedabad, Kolkata and New Delhi during January 7-9, 2016. During the visit, the UK Minister inaugurated the new British Deputy High Commission in Ahmedabad, addressed at the inauguration of the Bengal Global Business Summit in Kolkata and marked the launch of the new UK-India Skills Pledge in New Delhi. 6
III. India UK Trade and Investment 1. India-EU Broad-Based Bilateral Trade and Investment Agreement India EU BTIA negotiations are underway with the EU for a Broad based Trade and Investment Agreement (BTIA) with 15 Rounds having been completed. An intersessional meeting and Chief Negotiators meeting was held on May 13, 2013 in New Delhi. A Ministerial review meeting between former Minister for Commerce and Industry and Trade Commissioner EU was held on April 15, 2013 at Brussels to take stock and provide political guidance on outstanding issues. Apart from these meetings, sector-specific intersessionals, Digital Video Conferences (DVCs) are also held frequently, on a regular basis between the two sides. The areas covered in BTIA are: Trade in Goods, Sanitary & Phyto-sanitary Measures and Technical Barriers to Trade, Trade Remedies, Trade in Services, Rules of Origin, Investment, Intellectual Property Rights and Geographical Indications, Competition Policy, Customs and Trade Facilitation, Trade Defence, Dispute Settlement, Government Procurement and Sustainable Development. During the India-UK Summit held on November 12, 2015 in the UK, the Prime Ministers of both India and the UK reaffirmed their commitment to finalization of an EU- India BTIA as soon as possible. The UK and India committed to work closely together towards this end. To expedite the process of negotiation, during the stock taking meeting of the Chief Negotiators held in New Delhi on July 15, 2016 India had offered to EU an Early Harvest, including the chapter on investment. EU is yet to respond. Early Harvest which could include the sectors of mutual interest, (excluding contentious issues like automobiles and data security) and also the track on investment have been offered with the intention of early resolution of this issue to the EU side under the India EU BTIA. 2. India-UK Bilateral Investment Today the UK is the 3 rd largest inward investor in India, after Mauritius, and Singapore with a cumulative equity investment of US $ 24.07 billion (April 2000- September 2016. UK ranks first among the G20 countries and accounts for around 8% of all foreign direct investment into India for the period April 2000 September 2016. I. Investments from UK to India Cumulative FDI Inflows from UK (April 2000- September 2016) : US $ 24.07 billion Percentage share of FDI inflows into India from UK : 8% Rank : 3rd FDI from UK during the last 6 years 2010-11 US$ 2.7 billion 2011-12 US$ 7.8 billion 7
2012-13 US$ 1.0 billion 2013-14 US$ 3.2 billion 2014-15 US$ 1.4 billion 2015-16 US$ 898 million Share of top sectors attracting FDI Equity Inflows from the United Kingdom (from April 2000 to April 2015): (Amount of FDI equity inflows) Rank Sector Amount of FDI equity inflows % age of FDI equity inflows Rs. in crores US$ in million from United Kingdom 1 Chemicals (Other Than 26,438.48 5,781.14 25.99 Fertilizers) 2 Drugs & Pharmaceuticals 19,124.57 3,909.64 17.58 3 Food Processing Industries 19,411.16 3,054.68 13.73 4 Services Sector* 13,428.55 2,947.19 13.25 5 Petroleum & Natural Gas 11,320.36 2,318.46 10.42 Total of Above 89,723.12 18,011.11 80.97 *Services sector includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis According to Confederation of British Industry (CBI) s Sterling Assets India Report 2015, UK is India s largest G20 investor and employer; companies currently employ around 691,000 people across India, 5.5% of total organised private sector jobs in the country. Between 2000 and 2015, UK FDI worth US$22.2bn has generated around 138,000 direct jobs, 7% of the total 1.96 million jobs generated by FDI in India. According to the findings, UK is a close second (after the USA) in generating service sector jobs in India, with an estimated 43,000 positions created. The chemicals sector attracts the lion's share of British investment in India, at $5.78 billion (26 per cent of UK FDI), followed by the pharmaceutical sector at $3.76 billion (17 per cent of UK FDI) and the food processing sector at $3.05 billion (14 per cent of UK FDI). II. Investments from India to UK According to the latest Inward Investment Result 2015-16 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 2015-16, 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. 8
According to the Grant Thornton India Tracker 2016 Report, More than 800 Indianowned businesses, employs nearly 110,000 people in the UK. About 10% of these 800 Indian and India-focussed companies are listed on the London Stock Exchange. The top fastestgrowing Indian companies in the UK generate over 26 billion of turnover, an 18% increase compared to 2015. The study also stated that Indian companies in the UK pay a combined UK corporation tax bill of 650 million up from 500 million in 2015. 3. India-UK Bilateral Trade UK is among India s major trading partners. During 2015-16, UK ranked 12 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 04/01/2017 Values in US $ Millions S.No. \Year 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 1. EXPORT 8,589.93 8,612.54 9,779.07 9,319.73 8,828.71 2. %Growth 0.26 13.54-4.70-5.27 3. India's Total Export 305,963.92 300,400.58 314,405.30 310,338.48 262,290.13 4. %Growth -1.82 4.66-1.29-15.48 5. %Share 2.81 2.87 3.11 3.00 3.37 6. IMPORT 7,134.30 6,293.09 6,045.10 5,018.28 5,192.54 7. %Growth -11.79-3.94-16.99 3.47 8. India's Total Import 489,319.49 490,736.65 450,199.79 448,033.41 381,006.63 9. %Growth 0.29-8.26-0.48-14.96 10. %Share 1.46 1.28 1.34 1.12 1.36 11. TOTAL TRADE 15,724.23 14,905.62 15,824.17 14,338.01 14,021.25 12. %Growth -5.21 6.16-9.39-2.21 13. India's Total Trade 795,283.41 791,137.23 764,605.09 758,371.89 643,296.75 14. %Growth -0.52-3.35-0.82-15.17 15. %Share 1.98 1.88 2.07 1.89 2.18 16. TRADE BALANCE 1,455.63 2,319.45 3,733.98 4,301.46 3,636.18 17. India's Trade Balance - 183,355.57-190,336.07-135,794.49-137,694.93-118,716.50 Note:Since 2006-07, Petroleum figures are being computed from Import Daily trade Returns (DTRs) to genetate country-wise/port-wise tables. Up to 2005-06 consolidated petroleum import figures were being received from the Petroleum Ministry. According to the data published by the Department of Commerce, Government of India, two-way merchandise trade during 2015-16 stood at US$14.02 billion, marking a decrease of 2.21% as compared to 2014-15. 9
India s merchandise exports to UK declined by about 5.27% from US$ 9.31 billion in 2014-15 to US$ 8.82 billion in 2015-16 and imports from UK have increased by 3.47% from US$ 5.01 billion in 2014-15 to US$ 5.19 billion in 2015-16. UK s share in India s global trade has gone up from 1.89% in 2014-15 to 2.18% in 2015-16. 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 16.33 billion. January 4, 2017. 10