The UK-India relationship has grown and continues to evolve. A lot has changed in recent months. The UK has formally departed the EU and has made the Indo-Pacific region a top priority. Aligned with the initiatives of the UK-India Joint Economic and Trade Committee, and to help companies overcome their trade and investment challenges in the UK-India economic corridor, various policy reforms have been pursued with both the governments in the recent past.
At the forefront of these advocacy measures are India’s ministry of commerce and industry, the UK’s department for international trade, and several government entities, including the Indian PMO and 10 Downing Street. The UK India Business Council has been fruitfully engaging with the Indian government to develop and nurture the UK’s trade and investment relationship with India.
UK firms have long felt that the introduction of a globally competitive corporate tax rate in India will have a positive impact on manufacturers and supply chains as businesses will be able to reinvest more of their profits in innovation and expansion. We had appealed to the commerce and industry ministry that India should bring this rate in line with major economies. The Modi government later reduced the corporate tax rate to 25% which has helped in attracting FDI even during the pandemic.
In insurance, we have been advocating opening up the sector to attract greater FDI. It was therefore encouraging to find the FDI limit in insurance increased from 49% to 74% in the Union Budget 2021-22.
Given India is the world’s third-highest military spender, we have been advocating FDI limit in defence be raised. In 2020, India raised the FDI cap from 49% to 74% through the automatic route, a significant step in the right direction. In August 2020, a UKIBC-KPMG report emphasised that a flourishing Indian defence sector requires enhanced foreign technology transfer which will lead to co-development and co-creation to meet India’s needs and enable exports, supporting the Atmanirbhar Bharat mission. This contribution was acknowledged in the Defence Acquisition Procedure 2020.
Recognising that India must globalise its higher education to benefit students who aspire to, but cannot afford overseas education, we submitted reports to the ministry of education covering the international collaboration agenda. India’s NEP 2020 announced pathways for top 100 foreign universities to deliver degrees in India.
We have argued for a substantive increase in government expenditure on healthcare which was partly reflected in the recent Budget. We have consistently engaged with India’s National Pharmaceutical Pricing Authority and Department of Pharmaceuticals to ease regulatory challenges faced by businesses around issues like intellectual property, revision of the National List of Essential Medicines and price capping. Drug pricing is a tightrope walk. Innovation gets discouraged if prices are too low whereas patients suffer if they are too high. NPPA later increased ceiling prices of 21 formulations by 50%, in sync with our report.
Over the years, we have supported the UK’s food and drink sector with exports to India having risen to almost £20 billion. We have been advocating for a phased reduction of basic customs duty on import of alcoholic beverages. While this request was addressed in the Budget this year, another agri infrastructure and development cess was introduced which ensured that the overall duty burden remains unchanged.
Data being the new oil, we highlighted to MeitY in 2020 the importance of an appropriate data protection legislation that balances innovation and privacy, considers globally-aligned policies around digital trade and services, and the need for robust digital infrastructure. A Data Adequacy Agreement between the UK and India for cross-border data flow has also been recommended.
Taking cognisance of our stakeholder consultations with UK industry, the Law Commission of India submitted a framework that recommended the regulation of gambling and sports betting in India. This move would eventually lead to protecting the integrity of sport, stamp out corruption, expand the tax base, and stimulate investments and job creation in India.
Advocacy to support businesses is an ongoing journey and a lot is yet to be accomplished. Sustained efforts and being mindful of the balancing act policy makers face are crucial to ensure that genuine aspirations of both countries are realised. Such efforts would surely contribute to maximising two-way investments and support the Enhanced Trade Partnership, as a prelude to a UK-India Free Trade Agreement.
Views expressed above are the author’s own.
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