It wasn’t supposed to be like this. As Brexiteers celebrated a wholly unexpected result the morning after the Brexit vote, the country was supposed to free itself the shackles of the European Union and go forth and trade with the rest of the world like never before.
A paper released by the Commonwealth just a few months after the Brexit vote said that trade “would increase trade between the countries by 25 per cent”. A recent India-UK Week of activities was euphoric in its ambition for increased bilateral trade.
But a few weeks ago, Unearthed released a copy of the official bilateral UK-India Trade Review, prepared for Joint Economic and Trade Committee (JETCO) on 11 January 2018. The document has been described as a key text for the new UK-India trade partnership announced in April at the Commonwealth Heads of Government Summit in London in April.
In short, it said that India will not benefit much from relaxation in non-tariff barriers such as inspection regimes and food standards post-Brexit, under the British government’s current proposed version of Brexit, because many decisions will “remain within EU competence”.
Based on current and potential future importance, the five goods sectors identified as “sectors of interest” for the UK are aerospace, chemicals, automotive, food and drink and life sciences.
In the services industries, UK education is likely the most important sector, followed by travel and tourism, and ICT. The big areas of potential identified here are in financial services, business and professional services exports from the UK to India.
IT and related professional services are by far the largest export from India to the UK. India therefore has a significant interest in concluding a bilateral social security agreement to ensure social security (National Insurance contributions) are not subject to double payment.
The Review highlights financial services as an area of increasing prominence for India globally, but that currently “links between the two countries are not yet deep enough to untap the full commercial potential for either side,” despite multiple bond listings on the LSE in the last three years, and a boom in AIM listings a few years earlier.
Issues faced by UK and Indian businesses in sectors of interest
While Indian IP law was seen as thorough, IP enforcement in the automotive sector was highlighted as a major challenge impacting the flow of advanced concepts and technologies from the UK.
The UK’s comments echoed similar frustrations other governments have too, largely around the complexity that comes from the lack of a common regulatory approach across states in India.
For example, in aerospace, while the scale of opportunity in India is massive, on-the-ground realities of the ease of doing business are different. Lengthy customs delays, lack of transparency and unrealistic local content requirements make it different to bring world-class technology to India.
In chemicals and the food and drinks sectors too, India has complex regulatory requirements that require harmonisation with global norms. For the latter, federal, state and intra-state regulation can be very confusing for foreign SMEs, product registration is difficult, as are many inconsistent labelling and licensing rules. That said, Indian exporters to the UK have broadly similar, specific complaints, which are highly likely to remain post-Brexit.
But the one big difference between the two is that the EU’s regulatory requirements are consistent across all EU markets, whereas India’s market is internally fragmented.
Repatriation of funds is unnecessarily complicated, due to regulatory complexity. While the Review didn’t specifically highlight the use of hawala transfers, progress in this area would be welcome all around.
Avoiding double-payment of social security contributions is an issue disproportionately impacting Indian IT workers in the UK. Pension rules introduced by the Conservative government outline that an employee is eligible for pensions benefits only after ten years of NI contributions. But Indian professionals often stay for less than ten years, still pay NI, and also pay social security back in India.
The big elephant in the room in the report was immigration. Just a page was devoted to this out of a 52-page report. This remains, by far, the big issue as far as Indian exports of services to the UK goes. At the same time, if it was easier for Britons to work in India at least by providing clearer FRRO, both countries would greatly benefit.
When we run monthly Doing Business in India seminars with chambers of commerce around the UK, including the Doncaster Chamber and East Midlands Chamber of Commerce, India is still perceived as a land of opportunity, but great complexity for UK SMEs. Not once has an SME said in these seminars that Brexit is a predominant reason for them wanting to trade more with India, as many in Westminster would boldly suggest.
The post Where does India-UK trade go post-Brexit? appeared first on India Outbound.
source https://www.indiaoutbound.org/where-does-india-uk-trade-go-post-brexit/
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