UK seems to be getting ready for a trade deal-signing spree as it looks to a future beyond EU. In a freewheeling interaction with The Dollar Business, Kevin McCole, COO, UK India Business Council (UKIBC), explains why a comprehensive UK-India bilateral economic agreement must not wait for the Brexit dust to settle.


Interview by Ahmad Shariq Khan | May Issue 2017 | The Dollar Business

TDB: In a post-Brexit world, how is UK India Business Council realigning strategies to promote UK-India trade?

Kevin McCole (KM): We will be working with our members to coordinate the dialogue between the governments and the Joint Working Group set up by UK International Trade Secretary Liam Fox and Indian Commerce Minister Nirmala Sitharaman. When the time comes to begin talks, we will be encouraging both governments to prioritise bringing down both tariff and non-tariff barriers through a Comprehensive Economic Partnership Agreement (CEPA). In terms of tariff barriers, if duty on alcohol is brought down, it would be of great benefit. Non-tariff barriers are also an issue, and efforts to improve the business environment by Prime Minister Modi’s government are very welcome but must go further to ensure a future CEPA is successful. Any agreement should be forward-looking and take into consideration the economic drivers of the future.

There is a rising interest and demand for UK goods, services, technology and know-how to help achieve the goals set out in programmes such as ‘Make in India’, ‘Digital India’, ‘Skill India’ and ‘Swachh Bharat’. And there are several areas where more bilateral trade and investment can bring near-term benefits to both countries. Time waits for no one and it is important that companies do not wait for the Brexit dust to settle. For a comprehensive bilateral economic agreement, the opportunity is now!

TDB: Has British Prime Minister Theresa May’s visit to India made any difference to India-UK relationship?

KM: The UK-India relationship has gone from strength to strength under Theresa May’s leadership, with the Prime Minister making India the destination for her first non-EU bilateral visit. Many cabinet ministers have visited India and several others are expected to do so in the next couple of months. There is much to be optimistic about. And with 2017 being the UK-India Year of Culture, there will be many events and initiatives aimed at celebrating the strength of our relationship. As UK negotiates its exit from EU, India will remain an important partner. And with goodwill on both sides the possibility of negotiating an FTA or CEPA in future is certainly on the table.

TDB: What about the issue of Indian companies that despite being the largest manufacturing employers in UK find it difficult to hire skilled workers from outside the country?

KM: The contribution Indian businesses and individuals make to UK’s economy is well-understood and much appreciated in UK. In fact, the UK government engages closely with Indian businesses to help them expand their investments in the country. Access to talent is only one of the factors at play when businesses in UK consider investment decisions. This applies equally to indigenous UK companies or investors from India and elsewhere. What we see on the talent development front is that industry, schools, further colleges, universities, local authorities and the government, all are working together to build a pipeline of industry-ready talent.

TDB: In a fast-changing global scenario, is India doing enough on the policy reforms front to create a conducive business environment?

KM: There is no doubt that India is a fast-emerging economic power. Simultaneously, there is no doubt that the reforms introduced by the government over the past three years have solidified this strong economic performance. Efforts are being made to further improve the ease of doing business and the smooth rollout of GST this year is the most important step in doing so. There is large untapped potential. Moves to open up areas in the services sector to foreign investment would go a long way in improving the business climate.

A number of programmes have also helped improve confidence. For example, businesses believe the ‘Make in India’ initiative, which has undoubtedly been a success, is an important plank in India’s growth story as its successful implementation will create jobs for the growing pool of young workers in India. This, in turn, will boost domestic demand and unleash a cycle of growth for the country. As 58% of UK’s investment into India is in manufacturing, companies such as Perkins and GSK are already contributing to the ‘Make in India’ story. At the same time, ‘Digital India’ aims to create a knowledge economy and promote good governance, which will help grow India’s economy in the 21st Century. UK companies such as Vodafone and BT are already collaborating with the Indian government to realise this effort. In fact, in UKIBC surveys of 2015 and 2016, most respondents felt that it is getting easier to do business in India. In other words, the government’s intentions to bring about wide-ranging reforms have not gone unnoticed.

TDB: Which sectors are of mutual interest to India & UK? And what makes UK an ideal investment destination?

KM: There is great potential across a range of sectors. For example, there is a growing demand in India for high-quality consumer goods. The country also has a largely untapped market in financial services – in fact, services like insurance could unlock great opportunities for both countries. Companies in both countries are benefiting greatly from partnerships and at the UK India Business Council, through our export opportunities initiative, we are helping connect businesses to perfect partners.

UK is leaving EU, but we are deepening our engagement with the world. PM May’s vision of a ‘Global Britain’ means that we are entering a new age of international trade and investment. UK remains a compelling investment destination for Indian companies. For a start, it is the 5th biggest economy in the world. It is English speaking, has competitive corporate tax rates with extraordinary talent and London as the world’s leading financial centre. There is much beyond London, with dynamic and fast growing cities like Sheffield being home to advanced manufacturing businesses with world-beating technologies.

TDB: As both India and UK are economies characterised by a large number of SMEs, do you believe both governments should promote more SME-SME collaboration?

KM: There is clearly an opportunity for SMEs to play a larger role in the bilateral relationship. However, since SMEs are often short of time, finances and the experience needed to enter a new market, particularly a complex market like India, they require a certain degree of support to help them establish themselves. At the same time, it is also worth noting that while SME-SME collaboration is possible, it is more likely that an SME will enter UK or India to partner with an MNC. So, Indian SMEs shouldn’t look to connect with just UK SMEs and vice versa. They should look to find the right partner or client, regardless of size.

TDB: The Indian government?is slowly opening more sectors for foreign direct investment (FDI). Do you see any barrier that could hamper its inflow?

KM: The Indian government has taken great strides over the last few years. In a recent consultation of UKIBC members, FDI caps were barely mentioned. Three years ago, this would have been a hot topic. Nevertheless, there are some areas where FDI liberalisation would benefit India and the UK-India business relationship; for example, foreign corporate lawyers cannot operate in India and the defence offset rules inhibit investment from manufacturers in that sector.

TDB: How will GST, India’s big tax reform, impact doing business in India?

KM: GST will go some way in making India a world-class business destination, by removing many state-to-state barriers that currently exist. Coupled with the increase in digitisation of government services, this is about bringing India’s economy into the 21st Century. However, there are several issues associated with GST, including the treatment of sectors such as alcohol, petroleum products and services that are delivered pan-India. The industry would welcome any clarity on the implementation.