Access India: How UK Businesses Can Take Advantage of the 2021 Enhanced UK-India Trade Partnership Deal

Posted by India Briefing Written by Op-Ed by Chris Devonshire-Ellis

• Bilateral trade set to double in coming decade.
• Take advantage of e-commerce, business matchmakers, and agents to export to India.
• Set up liaison offices and manufacturing units to tap into a middle class consumer market the size of the United States.

The UK and India have agreed to new trade and investment deals as talks between Prime Ministers Boris Johnson and Narendra Modi formalized the Enhanced Economic Partnership that was set out earlier in the year during high level intergovernmental talks (see India, UK Agree To Immediate ‘Enhanced Trade Partnership).

While much of the initial trumpeting was related to Indian investment into the UK, opportunities exist for UK manufacturers and exporters to sell to India too. Trade between the UK and India is already worth around £23 billion a year and supports over half a million UK jobs. The formalized ‘Enhanced Trade Partnership’ sets a target of doubling the current value of UK-India trade, by 2030, and is viewed by both sides as a declaration of their shared intent to begin work towards a comprehensive free trade agreement (FTA). India’s US$2.6 trillion economy, at the end of 2020, is considered the largest market to which the UK has committed to negotiating a trade deal with, to date. 

Specific areas of note for British exporters, industries

There are specific areas negotiated under the Enhanced Trade Partnership (ETP) that will benefit British businesses:

• Lifting of restrictions to enable fruit producers across the UK to export British apples, pears, and quince to India for the first time.
• Securing improved access for medical devices through the acceptance of UK Certificates of Free Sale in India and removing the requirement for additional accreditation of UK medical devices when exporting to the Indian market before they can be sold.
• Committing to deepening co-operation in educational services and concluding work on the recognition of UK higher education qualifications, an outcome expected to encourage an increase in student flows, skills transfer, and knowledge sharing between the UK and India.
• Committing to working on removing barriers in the Indian legal services sector. This is anticipated support in changing the rules preventing UK lawyers from practicing international and foreign law in India, a step that could significantly increase UK legal services exports and imports from India.

The ETP creates immediate opportunities for British businesses in India across industries including food and drink, life sciences, and the service sector. Non-tariff barriers on fruit and medical devices will be lowered – allowing British businesses to export more of their products to India. 

An example of how the ETP is expected to work can be seen in the immediate deals that were signed. Opportunities exist in these areas and others: 

• Researching, developing, and licensing new pharma products
• Biotransformation technology, which enables plastics to become fully bio-degradable
• Biopharmaceutical finished products
• Robotics surgical equipment
• Critical hardware and software bespoke data centers
• Drone surveying equipment and AI technology
• Smart meter test benches for electricity distribution companies
• E-bicycles
• Video game production, and digital entertainment platforms 
• Color and additive solutions for the vinyl, non-vinyl and associated additive industries
• Decarbonizing technologies

Product licensing  

There are issues, however ,with exporting to India. In many cases, and especially in consumables, rigid testing and approvals are required of products to ensure they are contamination free and adhere to Indian quality control (QC) standards. That requires the engagement of third-party agents in India to assist with the QC process. It is critical to note that at present, no FTA between the UK and India exists, meaning there is no specific agreement on these protocols. It is also important to note that India as a country is a federal union, and regulatory aspects differ by state territory; there is no one ‘India inclusive’ mechanism in place. For example, some Indian States are ‘dry’ – meaning no alcohol is permitted into these markets or it is heavily regulated. That means whisky exporters, for example, need to do their homework on where product can be imported and retailed. Our introductory article on India’s import licensing regime can be accessed here.

Product distribution

UK exporters will need to source a reliable importer and distributor – as mentioned above, it will be necessary to plan out where and how to distribute your product in advance as different Indian States have different policies, and some impose tariffs on products brought in from another State. That means the entire ‘selling to India’ strategy needs to be worked out in advance. India has a significant professional services industry, and tapping into local business matchmaking services will strengthen market access for exporters and ensure they arrive at a cost-competitive strategy. Our introductory article on matchmaking services in India can be accessed here.

E-commerce 

The World Economic Forum has stated that within the coming decade, India will have one billion domestic consumers buying from the internet. A relatively inexpensive way to sell to India is through e-commerce channels. Our introduction to selling online to Indian customers can be read here.

Managing your exports yourself – Setting up an Indian liaison office  

As volumes and revenues increase, it may become pertinent to establish your own office in India – with your own staff assisting with all the import and distribution regulatory aspects in-house. This cuts down on the cost of agents; it is wise to know when those overheads can be offset by going it alone. India provides foreign businesses with an opportunity to do just this, in the form of establishing a liaison office (LO). These operate as local cost centers but have the advantage of bringing everything under one roof. Our introductory article on setting up an LO in India can be accessed here.

Manufacturing and selling to India and overseas 

Ultimately, your UK business operations in India may wish to take its newfound expertise and take advantage of the FTAs India has with other countries. These permit products manufactured in India to be exported, at reduced or duty-free tariff rates to other markets, including Bangladesh, Nepal, Pakistan, Sri Lanka, the ASEAN markets of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, as well as to China. India also has an FTA with Mauritius – helpful for accessing the Africa market, some of the Gulf states, and Mercosur in South America. Research on the applicability of these needs to be carried out, and a viable structure put in place; however, the opportunity exists. Our introductory article identifying India’s Free Trade Agreements can be accessed here.

There are also options to establish a manufacturing unit in India. A well-established, pan Indian partner can assist with much of the administrative issues and will also have contacts in place, so forming a joint venture may be one route to go. Alternatively, UK investors may establish a wholly owned subsidiary company in India, conducting both manufacturing and trading. Our complimentary magazine discussing the setting up of a manufacturing and trading company in India can be accessed here.

Special economic zones and investment incentives 

India has a wide range of special economic zones (SEZ) in place throughout the country; these are useful for conducting export manufacturing in India, such as importing British components, matching these with Indian sourced components to produce a finished item, then either reselling to the India market (at which point import duties and goods and services tax/GST kick in) or exporting them elsewhere – including back to the UK. Our introduction to India’s SEZs can be accessed here.

India also has a vast array of tax and other incentives, designed to support the national Make in India / Atmanirbhar Bharat or Self-Reliant India campaigns. These vary from industry and sector and across different States, are highly specific, and too numerous to list here. Our local India offices can advise on available incentives applicable to your particular business sector and preferred location in India by emailing [email protected].

Summary 

With the intention to double UK-India bilateral trade to £46 billion over this decade, there are plenty of opportunities for British businesses to access India and take advantage of this new opportunity. India’s middle class consumer population is significant in size and estimated to be equivalent to that of the United States. Also, as India’s demographics are much younger compared to the US, India’s middle class is expected to become the largest in the world (in terms of numbers of people) by 2025.

British businesses investing in India today are also likely to benefit later, as a UK-India Free Trade Agreement has been mooted to be in place by 2030 – further increasing the opportunities for trade. While that may seem some way off, the old adage of ‘the early bird’ applies, and especially in a country such as India. Getting involved in the India market, learning how it works, and where the niches are for your products and services is a process that should be started with as soon as is practical. 

Our firm, Dezan Shira & Associates, includes British shareholders and has a 29-year-old history of assisting foreign investors into Asia. With India offices in New Delhi, Mumbai, and Bangalore – we are at the forefront of assisting UK investment and trade into the country. You may also take a look at our recent India market assessment, and 2021 Doing Business in India Guide that provide pertinent information.   

This article was originally published on May 6, 2021. It was last updated May 10, 2021.

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to [email protected] for more support on doing business in in India.

We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.