British companies grow their stronghold in India
The UK is the sixth largest foreign investor in India, having channeled nearly $30 billion into the country between 2000 and 2020. A new Grant Thornton report examined bilateral relations in times of Covid-19 and Brexit.
Grant Thornton has been studying UK-India trade relations for nearly 30 years now – in a bid to identify key investment opportunities between markets that have such an intertwined history. Per the latest findings, the two countries’ futures are fairly intertwined too.
The new report focuses on the UK’s presence in India, gauged by the number of companies in India controlled – directly or indirectly – from the UK. More than 570 such companies exist as of December last year, with a combined turnover of over $46 billion and a staggering average revenue growth rate of 26%.
The economic contribution is phenomenal: UK-based companies employ more than 400,000 people in India, and contribute over $2 billion in taxes. Over 20 of these companies generate revenues in excess of Rs. 5 billion (roughly $68 million), while more than 90 companies clock over Rs.500 million (~$6 million).
So there is widespread distribution of UK money in India. The same is apparent from a regional breakdown of investments. No doubt, big urban centres account for the lion’s share, with Delhi drawing 18% while Maharashtra and Karnataka – home states of Mumbai and Bengaluru – make up 22% and 15% respectively.
That said, Haryana, Tamil Nadu, Telangana, Uttar Pradesh and Gujarat each account for 5% or more, signalling a wide geographic scope. The versatility of investments is equally clear by sector. Industrials such as mining and manufacturing take the biggest piece of the pie, nearly equaled by business services.
Technology and consumer retail are also bright spots – each accounting for roughly 10% – while pharmaceuticals, financial services and energy are all healthy receivers of British foreign investments. The figures highlight the extent to which the UK is prevalent as an investor in India.
Building further
As it stands, the two countries are working towards strengthening these ties even further. “Both sides have agreed to work towards increasing cross-border investment flows in growing sectors by reducing restrictions on FDI,” noted Grant Thornton India partner Pallavi Bakhru.
India has taken several measures to boost its ease of doing business ratings in recent years – most recently exemplified by a major cut in corporate tax. “Other latest reforms have also been in areas of starting a business, dealing with construction permits, trading across borders and resolving insolvency,” said Bakhru.
Several factors are at play in strengthening bilateral ties. One is a shared historical legacy, which indirectly led to a vast Indian diaspora in the UK – described in the report as a “living bridge between the two countries.” Then there are the more immediate factors.
With Brexit throwing most of the UK’s trade relations into uncertainty, India represents a stable and rapidly developing ally to partly fill the void. Indian companies have recognised this opportunity, and have upped their own investments in the UK market.
No doubt, Covid.19 poised a significant risk to these ties, and global trade as a whole. But Bakhru points out how the two countries converted the relationship into one of support rather than severing links.
“India ensured that key supply chains of pharmaceutical products and surgical masks were maintained for the UK and other countries as the two sides worked on collaborating in vaccine research and manufacturing. Both countries have kept supply chains open without barriers.”
“Despite uncertainties, India is still viewed as an attractive investment destination with a huge domestic market, growing middle class and skilled workforce,” she concluded.
