As UK triggers Brexit and prepares for the life-after, Sujit S. Nair, Co-founder & Chief Coordinator of British South India Council of Commerce (BSICC), explains to The Dollar Business why a free trade agreement between a resurgent India and an EU-free UK is more likely than ever, and how that could be a win-win for both the countries.

Interview By Ahmad Shariq Khan | April Issue 2017 | The Dollar Business

TDB: Recently, UK’s Prime Minister Theresa May described India as UK’s “most important and closest” friend. How do you see the long-held bilateral strategic partnership shaping up in the coming years? 

Sujit S. Nair (SSN): India and UK have had a special relationship for decades. However, under the present circumstances where UK might not have unrestricted access to the European markets, it is important for the British government to build a closer trade relationship with India as it offers an opportunity for UK businesses to not only sell products and services to India’s booming middle class but also play a major role in tapping business opportunities available in the fastest growing economy of the world. If indeed UK considers India its most important and closest friend, then it must take steps to ensure that Indians in UK get special privileges. Also, UK needs to walk that extra mile to match its words with action.

TDB: Is BSICC pitching for any kind of trade agreement between UK and India? How will such an agreement benefit both the countries?  

SSN: Our focus has been to identify business opportunities in both UK and India and inform both the countries. We keep speaking to several British MPs and give them an understanding of the challenges that are being faced by companies while pursuing business in UK and India. This helps them share the same with their party leadership and policymakers.

A free trade agreement (FTA) between UK and India is the need of the hour and will be easier to achieve than one between EU and India, as it will be a bilateral agreement. The FTA will not only provide preferential access to companies but will also help tackle tariffs and non-tariff barriers to trade, which are currently prevalent when companies from UK sell products and services in India and vice versa. UK companies will benefit from the removal of tariffs on its high-value exports like machinery, metals, pharmaceuticals and whisky, among others. As for India, the major beneficiary of an FTA will be apparel and footwear sectors as tax and tariffs are impeding the competitiveness of these sectors when compared to the better market access enjoyed by companies from Bangladesh, Vietnam and Ethiopia.

For India, this will also be beneficial as apparel and footwear sectors are among the largest employers. However, India needs to be careful that its agricultural sector, which employs the largest number of people and is one of the largest contributors to GDP, is not affected as an FTA with UK can also lead to a situation whereby small farmers, especially those involved in pastoral farming, are not able to compete with technologically advanced and subsidised pastoral farmers from UK.

TDB: Do you see India as an evolving economic superpower?

SSN: During the course of history, numerous countries and cities have seen their rise and fall. According to Cambridge historian Angus Maddison, India’s share of world income during the 1700s was around 22.6%, which was almost equal to Europe’s share of 23.3% at that time. Today, India’s share of global GDP is around 3%, whereas Europe’s share is around 30%. Therefore, contrary to the western world labelling India as an ‘emerging economy’, I believe it should rather be called a ‘re-emerging economy’ to justify India’s history. India’s strength is its stable government, visionary leadership, booming economy and young population. This combination has positioned India as a bright spot in the otherwise gloomy world economy. The recent initiatives by the Indian government have increased the confidence of businesses worldwide that are looking to tap opportunities in India.

However, one of the areas which I would like to see improvement in the trade and investment space is automation of some processes so that there is lesser human intervention. Implementing this in Indian embassies all over the world will make it convenient for businessmen and investors to conveniently get their visas without wasting time. Applying this in government departments will make it convenient for serious businesses to directly send across their proposal to relevant ministries without having to approach middlemen to set up meetings with government departments. At the same time, this will also convey that transparency is being given due importance.

TDB: What impact will Brexit have on Indian businesses in UK? What would be the USP that could make UK an ideal investment destination? 

SSN: There are about 800 companies owned by Indians in UK which provide employment to around 1,10,000 people. The idea, for many of these companies, was to use UK as the point of entry to EU. Therefore, those companies may now have to review their strategies to get access to wider EU.
A benefit of Brexit will be the lower value of pound vis-à-vis the Indian rupee. This will make it attractive for Indian companies to buy valuable assets and brands in UK. Another benefit of Brexit should be that India and UK might finally sign an FTA, whereby the two countries will reduce trade barriers, i.e. import quotas and tariffs, thereby increasing the trade of goods and services with each other.

TDB: Despite India being the third largest investor in UK, why is the process of hiring skilled workers from outside UK been made more difficult?

SSN: The UK government has made the policies harder with the intent to encourage UK companies to hire local talent. However, UK is now caught in a tricky situation. It needs to create a fine balance between managing the immigration targets and ensuring that companies are still able to hire skilled workers, which they need to boost the economy. On the positive side, I see this situation as a ‘reverse brain drain’ whereby highly skilled and talented Indians stay back in India and play a significant role in the economic development of the country. With that said, I would like to add that, at the moment, Indian companies in UK have no option but to wait and watch on how things unfold as this is an unprecedented situation. But in the case EU restricts UK’s access to the wider European market, then many Indian firms will shift a major portion of their operations to a country within EU to make the best use of the single market.

TDB: India and UK both have many SMEs, but we do not see many joint ventures. Why? What can be done to take Indian SMEs global?

SSN: SMEs in UK contribute about 47% of all private sector turnover in the country. But, SME-SME associations can work only when India’s non-subsidiary independent SMEs are given more benefits. The Indian government has various policies to benefit those enterprises that fall within the definition of an MSME, but from the international perspective, partnering with non-subsidiary independent Indian SMEs has to be made more attractive.

One of the ways to help Indian SMEs go global can be to provide sovereign guarantees to select SMEs to help them raise finance from international markets to upgrade their facilities with the latest technology as well as for working capital requirements. Another idea is to offer support from Indian embassies abroad to encourage them to use diplomatic channels for overdue payments from foreign companies.

TDB: Which key sectors and industries hold the maximum opportunities for South Indian states and UK businesses to work together? 

SSN: We see a massive potential in energy sector, especially in energy extraction from waste. UK and other European countries have perfected the art of converting waste to a valuable resource and this is something we have been trying for years to export to India but have not been successful. India needs to educate its businesses about the benefits of converting waste to energy.

Another area of interest will be the affordable housing sector, as the Indian government has recently provided infrastructure status to this sector. This will ensure easier access to institutional credit and help in reducing developers’ cost of borrowing for affordable housing projects. The approval process for affordable projects will create clear guidelines and increase transparency in the segment. This will encourage UK companies to share their technological expertise and encourage them to make investments in this domain.