India-UK trade agreement to spur trade at USD 20 billion by 2020: PHD Chamber

Prospective bilateral agreement and growth avenues would push trade between India and UK to USD 20 billion by 2020 from the current level of at around USD 14.3 billion in 2015-16, said Dr. Mahesh Gupta, President, PHD Chamber of Commerce and Industry in a press statement issued here today.

India and UK are bound by invigorating business and investment opportunities and the close economic linkages based on the fundamentals of understanding and support, said dr. Gupta.

Among various products, India’s thrust products in the UK includes knitted and non-knitted articles of apparels (20.33%); mechanical appliances and machinery (7.64%); pearls and precious stones (5.88%); Vehicles and parts thereof (5.53%); footwear and the like (5.44%); pharmaceutical products (5.15%); electrical equipment (4.49%); articles of iron and steel (3.45%) of the total exports to UK.

UK's thrust products in India includes pearls and precious stones (29.42%); mechanical appliances and machinery (13%); iron and steel (7.86%); electrical equipment (6.49%); optical, photographic, cinematographic and similar instruments (5%); aluminum and articles thereof (4.12%); beverages, spirits and vinegar (3.80%) of the total exports to India.

Dr. Mahesh Gupta also added that Indian exports into UK are mainly focused on Consumer Goods, viz. nearly 65% of the total exports. On the other hand, nearly 43.5% of the total imports from UK are focused on Intermediate goods.

Although the trend in India’s exports to UK has remained in favour of consumer goods over the years, India’s import from UK underwent dramatic shift from raw materials, viz. 36.5% of the overall imports from UK during 2007, to intermediate goods, viz. 43.5% presently.

Dr. Mahesh Gupta said that though India’s penetration in the UK’s market has remained consistent, UK’s penetration rate revealed signs of substantial revival in the recent past. Also, Indian products hold significant footprint in the UK’s market based on the intensity index of India in UK.

India’s export pattern has become more and more aligned with the import pattern of UK over time. Both nations witnessed a favorable complementarity scenario, which exhibits substantial potential trade gains for both the nations, further added Dr. Mahesh Gupta.

Also, the basket of exportable products from India remained opulently diversified compared to the importable basket from UK over time, thereby rendering Indian exporters relatively less susceptible to volatility in a turbulent trade scenario.

He also indicated about the lower than expected intra-industry trade figures between the two nations and to push trade further, both nations must engage in higher intra-industry trade in the medium to long run. Also, it is essential to reduce the exorbitant trade cost between India and UK for agricultural products to provide that much needed impetus to the agrarian exports.

Dr. Mahesh Gupta said that with further liberalization of FDI policy in different segments and the advent of GST next year, FDI from UK is expected to touch a new growth trajectory. Undoubtedly, collaboration of India and UK in the realm of investment and business can truly transform both the nation’s entrepreneurial ecosystem.

In the past 16 years, UK has invested nearly USD 22 billion in various forms of Foreign Direct Investment in India. UK is, presently, ranked 3rd biggest investor in India, and going by the trend, holds the potential to attain the top position, said Dr. Mahesh Gupta.

Dr. Mahesh Gupta further elaborated that majority of India’s investment in UK were in the Manufacturing sector, viz. around USD 766.32 million; followed by Financial, Insurance and Business services (USD 298.27 million); Transport, Storage and communication services (USD 81.77 million) among other significant investments in UK.

Going ahead, it is essential for both the parts to become proactive and become prompt in finalizing the bilateral agreement to rejuvenate the falling trend in trade. Both nations should continuously meet and engage in discussions related to mitigating bilateral trade issues, defence ties, renewable energy, skill development and other vital areas.

Going ahead, growth prospects for trade and development between two countries are very promising and sustainable, not only for the coming years but for the coming decades, said Dr. Mahesh Gupta.