Trade between India and the UK will suffer a “double hit” as a result of the Brexit vote and the decline in sterling, the head of India’s largest business lobby has warned, ahead of a three-day visit by Theresa May.
The prediction by the head of the Federation of Indian Chambers of Commerce and Industry (Ficci) echoes those of other analysts, and suggests Britain’s decision to leave the EU will loom large over the trip, which is aimed at boosting economic ties between the countries.
The prime minister’s first bilateral trip outside the EU will include a technology-focused trade summit in Delhi designed to “send the message that the UK will be the most passionate, most consistent and most convincing advocate for free trade”.
Ficci’s secretary general, A Didar Singh, said the Brexit vote would “obviously” have consequences for about 800 Indian businesses operating in the UK, as many used the country as a gateway into Europe.
“The EU is India’s largest trading partner … but exports from the UK to India have been declining,” he said, adding that trade would also be hit by the drop in sterling, which rallied on Friday.
“Now, exports from India to the UK will also decline because you’ve lost 18% of your pound’s value. So if I’m sending something to the UK and getting a lower return on it, I’m going to have a think about that. It’s a double hit.”
The picture is not uniformly bad: for some Indian businesses the impacts of Brexit present an opportunity, said Anuj Chande, a partner and head of the South Asia group at Grant Thornton.
“For those looking at acquisitions in the UK, the cost of those acquisitions has become much cheaper,” he said. “So we’re seeing increasing interest to buy into food manufacturing and distribution, and in the technology space.
“Equally, you’ve got a lot of Indian companies that aren’t necessarily looking to Britain as a launchpad into the EU but looking to capitalise on the design and experience of UK companies.”
Britain and India still shared deep cultural links that made it an attractive place to establish a base, he said.
“But the majority are concerned about what the future relationship with Europe is going to be, and if it’s going to go down the really hard Brexit route, then it’s going to raise some issues for Indian companies,” said Chande, amid great disagreement over what the Brexit deal should look like within the UK.
India’s pharmaceutical industry, expected to be worth more than £40bn by 2020, is one that might struggle to make large investments in the UK after Brexit.
London has been a hub for drug companies because the European Medicines Agency, which sets standards across the bloc, is headquartered in Canary Wharf. Spain and Sweden are reportedly among those already lobbying to be its new home.
India’s largest carmaker, Tata, will also be sweating over negotiations between Britain and the EU. About 90% of its value is tied up in the UK-based Jaguar Land Rover, which is dependent on European supply chains and markets that might soon attract steep duties.
During the EU referendum, Eurosceptics pitched Brexit as an opportunity to shift the trade balance towards the Commonwealth. An EU-India trade agreement has been stalled for nine years, although the Liberal Democrat Vince Cable has accused May of causing the delay because of immigration concerns.
Singh said the largest hurdles had proved to be India’s high tariffs on alcohol and automobiles. “The French wanted the wines, and the Brits and Germans wanted the duties on cars to go,” he said.
The vehicle tariffs would remain a sticking point, as would a likely Indian push for an agreement to include easier access to visas for its workers. “Our whole issue is that of the mobility of our human capital,” Singh said.
Hanging over the trip, too, would be the uncertainty over the final shape of Britain’s exit from Europe. “None of this can happen until after Brexit is done. So you’re talking at least three years down the road,” he said. “In uncertainty, nobody takes an investment decision.”
May will also face pressure to relax recently tightened regulations on student visas, of which about 11,000 were issued to Indians in 2015, down from 68,000 at the start of the decade.
“From the Indian perspective, the UK is no longer a prime destination,” said Maria Mathal, a Delhi-based market analyst and recruiter who specialises in international education.
India’s growing middle classes send about 350,000 people to study abroad each year “and they are looking at being able to work and stay on if possible in the host country”, she said.
She estimated each student’s value to to the education sector at about £20,000. “But they’re going to Australia, Canada and the US. Every country has shown a significant increase in the last three years. The UK is the only one that has shown a drop,” she said.
“I would attribute it directly to the current work and stay-back options in the UK.”
Meanwhile, the Indian author and MP Shashi Tharoor made headlines this week with a request for the UK prime minister to “bend his or her knees and beg forgiveness” for the Jallianwala Bagh massacre – committed in Amritsar in 1919 – when the centenary of the atrocity comes around.
At least 379 people were killed when the British brigadier general Reginald Dyer ordered his forces to fire on thousands of families who had gathered in the city in spite of a curfew for Baisakhi celebrations.
Tharoor, who is promoting a book on the toll of British imperialism on India, also told the Times of India that persistent requests for the return of the 106-carat Koh-i-noor diamond – given to the British government in the 19th century – were unlikely to be heeded.
“Atonement is, therefore, the best we can hope for,” he said on Tuesday. “A British prime minister, on the centenary of Jallianwala Bagh, apologising to the Indian people for the massacre and by extension for all colonial injustices – that would be better than any sum of reparations.”
Trade between UK and India to suffer double hit, says business chief – The Guardian