INDIA-UK BILATERAL RELATIONS

INDIA-UNITED KINGDOM BILATERAL RELATIONS

Basics and Background

 

  • India and the United Kingdom share a modern partnership bound by strong historical ties.
  • The bilateral relationship that was upgraded to a strategic partnership in 2004, was further strengthened during the tenure of British Prime Minister David Cameron who visited India thrice in his first term (July 2010, February 2013 and November 2013).
  • The successful visit of Prime Minister Modi to the UK in November 2015 gave fresh impetus to the bilateral relationship.
  • UK Prime Minister Theresa May’s visit to India in November 2016, which was her first overseas bilateral visit (outside the EU) after assuming office in July 2016 showcased the continuity of interactions at the highest political level.
  • Prime Minister Modi held wide-ranging bilateral talks with the British PM on 18 April 2018 in London to further intensify the future partnership between both countries even in the wake of Britain’s impending departure from the EU.

 

Political

 

  • Politically, relations between India and the UK occur mostly through the multilateral organizations of which both are members, such as the Commonwealth of Nations, the World Trade Organization and the Asian Development Bank.
  • After becoming the Prime Minister of the United Kingdom, Cameron was actively involved in enhancing the Indian-British relationship on various dimensions, such as business, energy security, climate change, education, research, security and defence, and international relations.

 

Economic Relation

 

  • India is the third largest foreign investor in the UK.
  • There are many bilateral trade agreements between the two nations designed to strengthen ties.
  • The British government has chosen India as one of its most influential trade partners because it is one of the “fastest growing economies in the world.”
  • The upcoming UK’s post-Brexit plan would be substantial scope for further strengthening bilateral cooperation across a range of sectors, including science & technology, finance, trade & investment, and defence & security between the two countries.
  • Recently, India and the United Kingdom (UK) affirmed their shared commitment towards a Free Trade Agreement(FTA) during the 14th virtual Joint Economic and Trade Committee (JETCO) meeting.

 

Joint Economic Trade Committee
  • JETCOprovides a forum to United Kingdom companies to enhance their links and develop new partnerships with India business and decision-makers.
  • Government to Government negotiations, which address issues of market liberalization and market access, are conducted through the JETCO process.
  • The UK India Business Council playsa key role in feeding the views of the UK business community into the JETCO process with a view to achieving favourable outcomes for UK companies.
  • One of the key objectives of the JETCO process is to unveil opportunities for UK’s most prominent institutional investors to invest in India.

 

Trade
  • UK is among India’s major trading partners and during the year 2016- 17, UK ranked 15th in the list of India’s top 25 trading partners.
  • As per trade statistics of MoC&I, India’s trade with UK in 2017-2018 was US $14.497 billion.
  • India’s main exports to the UK are articles of apparel & clothing accessories, power generating machinery & equipment, petroleum, petroleum products & related materials, etc.

 

Investment
  • UK is the 4th largest inward investor in India, after Mauritius, Singapore and Japan with a cumulative equity investment of US $26.09 billion (April 2000-June 2018), accounting for around 7% of all foreign direct investment into India.
  • India continued to be the third largest investor in the UK and emerged as the second largest international job creator with Indian companies having created over 110,000 jobs in the UK.

 

Defence
  • Cooperation in defence sector is another important pillar of bilateral cooperation.
  • During Prime Minister’s visit to UK in November 2015, the two countries agreed to elevate their Defence relationship by establishing capability partnerships in strategic areas.
  • At all the three services level, joint exercises and wide-ranging exchanges between the three services are conducted regularly.

 

Education
  • Education is an important plank of the India-UK bilateral relationship. Over the last 10 years, the relationship has grown substantially with the introduction of bilateral mechanisms such as the India-UK Education Forum, UK-India Education and Research Initiative (UKIERI), Joint Working Group on Education, Newton-Bhabha Fund and Scholarship schemes.

 

Science & Tech
  • Science and Technology sector is the fastest growing element of our bilateral relationship.
  • Joint investment in UK-India research has grown from less than £1 million in 2008 to over £200 million.
  • During the erstwhile UK PM Theresa May’s visit to India, a India-UK Clean Energy R&D Centre with a focus on solar energy storage and a collaborative R&D programme in energy efficient building materials were announced.
  • New research partnerships worth £80 million including a new Joint Strategic group on Anti-Microbial Resistance (AMR) with a joint investment of up to £13 million have also been established.

 

Cultural Ties
  • Cultural linkages between India and UK are deep and extensive, arising out of shared history between the two countries.
  • There has been a gradual mainstreaming of Indian culture and absorption of Indian cuisine, cinema, languages, religion, philosophy, performing arts, etc.
  • There are several Indian cultural organizations in the UK, which have been actively promoting Indian culture by involving the Indian Diaspora, British organizations and people.
  • The Nehru Centre is the cultural wing of the High Commission of India in UK which was established in 1992, and is currently one of ICCR’s flagship cultural centers abroad.

 

Indian Diaspora
  • The Indian Diaspora in UK is one of the largest ethnic minority communities in the country, with the 2011 census recording approximately 1.5 million people of Indian origin in the UK equating to almost 1.8 percent of the population and contributing 6% of the country’s GDP.

 

Other Developments
  • Access India Programme: High Commission of India, London initiated the ‘Access India Programme’ in September 2017 for facilitating investments by UK SMEs in India. o The primary focus of the AIP programme is on companies interested in investing in India i.e. those intending to set up manufacturing facilities as part of the ‘Make in India’ initiative.
  • Rupee-denominated bonds: Over $3.5 billion of rupee-denominated bonds have been issued in London since July 2016 including by HDFC, NTPC and NHAI.
  • Green Bonds: Indian Railway Finance Corporation (IRFC) has raised $500 million via a green bond offering and listed these instruments on the London Stock Exchange.
  • Varanasi Smart City Development Plan: New technical assistance for the redevelopment of Varanasi railway station under the Varanasi Smart City Development Plan will be extended by the UK.
  • Supporting the Start- up India initiative: UK will be investing £160 million across 75 start-up enterprises, apart from an additional £20million for a Start-Up India Venture Capital Fund.
  • First bond index series: State Bank of India (SBI) launched India’s first bond index series for overseas investors at the London Stock Exchange (LSE) in 2017.

 

BREXIT

  • A referendum held in 2016, to decide whether the UK should leave or remain in the European Union, decided in favour of a historic move of the UK leaving the European Union, popularly called as BREXIT.
  • The UK started the exit process by invoking Article 50 of the EU’s Lisbon Treaty. But the withdrawal agreement reached between the EU and UK has been rejected three times by UK MPs.
  • Having granted an extension of the Article 50 process until 12 April 2019, EU leaders have now backed a six-month extension until 31 October 2019. However, the UK will leave before this date if the withdrawal agreement is ratified by the UK and the EU before then.

 

Arguments in favour of BREXIT:

  • Trade benefits- UK feels that it can secure better trade deals with important countries like US, China, India.
  • Arresting reckless spending-Britain can stop sending £350 million, to Brussels every week. This money could be spent on scientific research and new Industries.
  • New Immigration laws- Leaving EU could help Britain reform its immigration policies which currently is expensive and ungovernable hence can offer an open door to EU and non-EU immigrants, who could contribute to Britain’s economy.
  • Reasserting National Sovereignty-Those in favor of Brexit argue that leaving EU would allow Britain to recapture its lost position in international bodies hitherto captured by EU

 

Arguments against BREXIT:

  • Trade Imbalance: Britain avoids exporter tariffs and red-tape, which is important because nearly 45% of its trade goes to EU. Another benefit is that being a member, Britain can obtain better trade terms, because of the EU’s size. Brexit would damage Britain’s export competitiveness.
  • EU Budget: The benefits outweigh the costs. According to the Confederation of British Industries UK’s annual contribution to the EU is equivalent to £340 for each household but trade, investment, jobs etc leads to £3,000 per year benefit to each household because of EU membership.
  • Immigration: Leaving EU will not stop immigration to the UK. Migration crisis especially refugee crises is a global issue requiring global efforts it’s not a country specific problem.

 

 

Issues affecting India – UK bilateral relations

 

BREXIT

  • Impact on Diaspora– Many members of Indian Diaspora in Britain had voted against BREXIT because it is likely that Indian IT Professional in Britain will face tough competition when UK will open up its border for more skilled migration.
  • Impact on Indian Companies in UK– A hard Brexit would inevitably impact more than 800 Indian companies in UK in crucial sectors of British economy Indian. But data has shown that companies are increasing investments in the UK and creating many thousands of new jobs. This demonstrates that, Brexit or no Brexit, India supports Britain.
  • Impact on India-EU Relations –With €72.5 billion worth of India-EU trade and €19.4 billion of India UK trade at stake, all partners needed to think through this issue carefully in the business and commercial context. Brexit seems to be a challenge to the India EU strategic partnership but India would need to learn to manage its relations with the EU without UK
  • Impact on Trade–Forging a Free Trade Agreement with India will not be a priority for UK as it leaves EU. Instead, Britain would initially focus on tackling existing barriers to trade. But India should grab the opportunity to fill the trade gap in UK, post-Brexit.

 

Visas and Immigration

  • Illegal Migration: There are more than 1 lakh illegal Indian immigrants in UK. Britain has started putting pressure on Indian government to ensure that Indians who have no right to remain in UK be sent back to India
  • Latest Measures: On the other hand, a white paper on post-Brexit visas and immigration strategy has been unveiled. It is expected to benefit Indian students and professionals, with a focus on skills rather than country of origin. An annual cap of 20,700 on the number of skilled work visas issued will also be removed.

 

Terrorism

  • In the context of Brexit, unlike the United States’ contemporary view, India continues to be hyphenated with Pakistan in London’s outlook.
  • India states the fact that bilateral relations went beyond the economic realm to issues such as security and terrorism were not being heeded in Britain, despite continuous efforts by India over the past decades.

 

Totalization agreement

 

  • The UK government has also made it mandatory for people to pay a health care surcharge as part of their immigration application.
  • When employees are there for a short term as part of their work, it is important that they get to keep their hard-earned money rather than giving UK thousands of pounds of free money as social security taxes.
  • Therefore, it is important for UK and India to sign the totalization agreement at the earliest.
  • The totalization agreement with the UK would have exempted Indian professionals who are working for a certain period of time in the UK from paying those social security taxes if they are paying such taxes in India.

 

Post Brexit Opportunities to develop bilateral relations:

  • Getting rid of EU (European Union) regulations, Britain will be more flexible and increase trade between the two nations as a result.
  • GDP growth: As one of the fastest growing economies with a GDP growth projection of 42.9% (period growth at constant prices) between 2016 and 2021, there are ample investment opportunities in India.
  • Telecommunications:Globally, India ranked number 3 in 2016 in terms of investment in telecommunications at US$13.1 bn (constant prices), making India one of the best suitors to invest in the UK’s telecommunication sector.
  • Tariff free:In the absence of the EU-India free trade agreement, the UK expects to benefit from tariff free trade with India.
  • Export:Britain will be able to increase its exports to India by more than £2 billion per year after Brexit by cutting EU red tape.
  • There is significant potential for the growth in the export of pearls and precious stones from the UK to India, cars and car parts and alcohol.
  • Import:Imports from India to the UK will rise by around £1 billion, meaning the UK’s balance of trade will be improved.
  • Exports of U.K – made cars to India rose 8.3% in the first half of 2017, while those of Indian-made cars to the U.K. almost doubled.
  • The 8.3% rise in sales of U.K. cars was driven by increased demand for British-made luxury cars, while the number of India-built cars rose by 48.6%.
Way Forward
  • UK values its relationship with India just more than trade and India regards UK as an important player in world politics and development. There is convergence of views on the global issues. Both believe in rule based international order. UK is the permanent member of the UNSC and supports India for its permanent membership. Both support for the development in west Asia.
  • There are areas in which UK seeks India’s support, opinion and share their views with us. At a time when UK is not the part of Europe, it is very important to have strong friends outside and India is one of those.
  • As the UK prepares to leave the EU, it is time to reset this relationship. Both the countries cannot afford to be complacent or rely on historical connections to deliver a modern partnership.
  • Britain could further its relationship with India including through security and defence cooperation, joint exercises of the armed forces, and working with India to achieve reform at international bodies such as the UN and WTO. Trade, security, a shared commitment to the rules-based international system — these are all factors in our growing and evolving partnership.
  • India is one of the fastest growing large economies of the world and FTA with the UK has played a significant role in enhancing the trade volume of the country.