SCHOOL OF COMMERCE FINANCE AND ACCOUNTANCY

CHRIST (DEEMED TO BE UNIVERSITY), DELHI NCR

CONTINUOUS INTERNAL ASSESSMENTS – III

INTERNATIONAL BUSINESS
BUSINESS-

Report on Business relations between INDIA and UK:

BY

Dristi Sarkar (21214409)

Lochan Sinha (21214417)

Mugdha Mohta (21214419)

Naman Taneja (21214420)

Sayed Ali Abbas (21214433)

Course: 6BBAF&A

Under the Guidance of

Dr. SESHANWITA DAS

DEPARTMENT OF COMMERCE , FINANCE AND ACCOUNTANCY

CHRIST (DEEMED TO BE UNIVERSITY), DELHI NCR

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 Acknowledgement

We would like to thank Fr. Jossy P. George for his monumental support and efforts to make the
campus a temple of learning.

We would also like to thank our Head of Department, Dr. Sanjay Rastogi,
Rastogi under whose
leadership the department as a whole has greatly benefitted and grown.

We would like to take this opportunity to thank our Faculty, Dr. Seshanwita Das for giving this
assignment and, without whom this project would not have been successful. Her guidance and
support have proved to be instrumental to its completion.

Dristi Sarkar (21214409)

Lochan Sinha (21214417)

Mugdha Mohta (21214419)

Naman Taneja (21214420)

Sayed Ali Abbas (21214433)

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A Long and Complex History: India
India-UK
UK Trade Relations

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The trade relationship between India and the UK stretches back centuries, marked by periods of
both exploitation and mutual benefit.

Early Encounters (16th-18th

18th Centuries):
● Spice Trade: European explorers, including the British, arrived in India seeking spices
like pepper, cloves, and nutmeg. This sparked a lucrative trade route, with India
exporting these highly prized commodities.
● The East India Company: In 1600, the British East India Company (EIC) was established,
becoming a dominant force in India's trade. The company initially focused on spices but
later expanded to textiles, cotton, and other goods.
● Colonial Control: The EIC gr
gradually
adually gained political power in India, culminating in
British colonization in the 18th century. This period saw an imbalance in trade, with India
primarily exporting raw materials and importing British manufactured goods.

Colonial Period (18th-20th

20th Cent
Centuries):
● Exploitation and Deindustrialization: British rule prioritized extracting resources from
India for their own industries. This led to the decline of India's traditional handicraft and
textile industries.
● Focus on Cash Crops: British policies encoura
encouraged
ged cultivation of cash crops like cotton
and indigo, often at the expense of food production, leading to famines in India.

Post-Independence
Independence (1947 onwards):
● Shifting Dynamics: After India's independence in 1947, the trade relationship started to
shift. India
ndia pursued self
self-sufficiency
sufficiency and import substitution policies to reduce
dependence on Britain.
● Diversification: Both countries diversified their trade partners. India looked to the USSR
and other socialist countries, while the UK focused on Europe.
● Graduall Liberalization: From the 1990s onwards, India liberalized its economy, leading
to increased trade with the UK and other nations.

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 Current Trade situation

Positive Signs:
● Increasing Trade Volume: Overall trade between India and the UK has been increasing.
increasi
According to UK government data, total trade in goods and services reached £38.1 billion
in the four quarters to the end of Q3 2023, an increase of 8.7% from the previous year.
● Diversification: Trade is becoming more balanced, with both countries exporting
expor finished
goods and services. Key sectors include IT, pharmaceuticals, and automobiles.
● Growing Bilateral Trade: Today, India and the UK are significant trading partners. Trade
is more balanced, with both countries exporting finished goods and services.
services Sectors like
IT, pharmaceuticals, and automobiles are crucial.
● Free Trade Agreement (FTA) Negotiations: Both nations are in talks for a comprehensive
FTA, aiming to further boost trade and investment.
● Focus on Knowledge Economy: The future of India
India-UK
UK trade is likely to focus on
knowledge-based
based industries like education, research & development, and financial
services.
● Challenges: Trade barriers, protectionist policies, and currency fluctuations remain
challenges
hallenges to smooth trade flow.
● The Rise of Asia: India's growing economic clout and its location within the dynamic
Asian market will be key factors in shaping future trade relations.

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Negotiations for a Free Trade Agreement (FTA):
Talks for a comprehensive FTA are ongoing, aiming to further liberalize trade and boost
investment.
An FTA could significantly benefit both economies by reducing tariffs and other trade barriers.
However, the latest round of negotiations reportedly ended w
without
ithout resolving some key issues,
and an agreement before India's next general election seems unlikely.

Challenges:
● Unresolved Issues in Negotiations: Areas like market access for goods and services, and
investment protection, remain sticking points in th
the FTA talks.
● Currency Fluctuations: Fluctuations in the exchange rate between the Indian Rupee and
the British Pound can impact business profitability for both sides.
● Protectionist Policies: Protectionist policies in either country could hinder the smooth
flow of trade.

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The exchange rate between the Indian Rupee (Rs.) and the British Pound
(GBP) significantly impacts international business between India and the UK.

Indian Rupee (INR) Vs United Kingdom Pound (GBP)

Recent Trends:
● GBP Strength:: Looking at recent times, the Pound has been relatively stronger compared
to the Rupee. In January 2023, the GBP/INR exchange rate crossed a historic milestone,
reaching ₹100 per Pound for the first time. This trend continued, with the Pound hitting
an all-time high of ₹107.74 in July 2023.
● Over the recent period, the British Pound (GBP) has been strengthening against the
Indian Rupee (INR). This means it takes more INR to buy one GBP. News sources point
to a high of 107.74 INR per GBP in July 2023
● INR Fluctuations:: The INR hasn't shown significant growth compared to the GBP. There
might be periods of strength, but overall, it hasn't kept pace with the GBP's rise.

Reasons for GBP Strength:

● India's Trade Deficit:: India has a trade deficit with the UK, m
meaning
eaning it imports more from
the UK than it exports. This can put downward pressure on the Rupee's value.
● Global Economic Factors
Factors:: Global economic uncertainties and the ongoing war in Ukraine
have also played a role.

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Impact on Each Other:
● Impact on India: A stronger Pound can be beneficial for Indian consumers buying UK
goods at a cheaper rate. However, Indian businesses exporting to the UK might face
challenges due to the more expensive Rupee.
● Reduced Purchasing Power of INR
INR: A stronger GBP means Indians get
et fewer rupees for
their pound, reducing their purchasing power for British goods and services.
● Potential Boost for Indian Exports
Exports:: Conversely, a weaker INR can make Indian exports
cheaper for foreign buyers, potentially boosting Indian exports to the UK.
● Investment Flows:: Currency fluctuations can also influence investment decisions.
Investors might be drawn to assets denominated in the stronger currency (GBP in this
case).
Impact on UK:
● Exporting is expensive:: A weaker Rupee can make Indian imports more affordable for
UK businesses.
However, for British companies exporting to India, it can make their products less
competitive.
● Limited Direct Impact:: The INR
INR-GBP
GBP exchange rate doesn't directly affect most people
peopl
in the UK. Trade between India and the UK is significant, but the GBP is primarily
influenced by factors like global economic conditions, interest rates, and the strength of
the US Dollar (USD).
● Indirect Impact:: A strong INR could potentially make Indian goods and services cheaper
for British businesses to import, but this effect is likely small compared to other factors
influencing trade.

Exchange Rate Volatility:

● Fluctuations in the exchange rate can create uncertainty for businesses, making it difficult
difficu
to plan and price products and services effectively. This can discourage international
trade.
Hedging Strategies:

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 ● Businesses can use financial instruments like forward contracts or options to hedge
against exchange rate fluctuations. Hedging helps mitig
mitigate
ate the risks associated with
currency movements.

The exchange rate can influence the profitability of international business for both Indian and
British companies. Companies need to be aware of exchange rate movements and implement
strategies to manage the
he risks involved.

Factors influence the exchange rate between the Indian Rupee (INR) and the
British Pound (GBP) leading to an impact in international trade amongst
them.

Economic Fundamentals:

● Interest Rates: Currencies with higher interest rates tend to be more attractive to
investors, increasing demand and pushing the exchange rate up. A higher interest rate in
India compared to the UK would put upward pressure on the INR.
● Inflation:: High inflation erodes the purchasing power of a currency, making it less
valuable. If inflation is higher in India than the UK, the INR would tend to weaken
against the GBP.
● Economic Growth: A strong and growing economy inspires confidence in its currency,
currenc
leading to appreciation. Conversely, a weak economy can cause a currency to depreciate.
The relative economic performance of India and the UK plays a role in the exchange rate.
● Current Account Deficit:: A current account deficit occurs when a country imports
imp more
than it exports. This can put downward pressure on the currency as there's a higher
demand for foreign currency to pay for imports.

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Government Intervention:

● Central Bank Policy:: Central banks can influence exchange rates by buying or selling
theirr own currency in the foreign exchange market. For example, the Reserve Bank of
India (RBI) might intervene to prevent sharp fluctuations in the INR.

INTERNATIONAL FINANCIAL MARKET

India-UK
UK Financial Market Ties: A Historical and Modern Perspective
India and the UK boast long-standing
standing ties in the financial sector, with a recent focus on
strengthening cooperation. Here's a detailed breakdown of their historical and current situation:

Historical Context:
● Colonial Legacy: The UK's colonial rule in India heav
heavily
ily influenced the Indian financial
system. Institutions like the Reserve Bank of India (RBI) were established based on
British models.
● Post-Independence
Independence Divergence: After gaining independence, India developed its own
financial framework, with a focus on sstate-owned
owned banks and a more regulated
environment.

Modern Developments (Post-Liberalization):

Liberalization):
● Growing Interdependence: Since the 1990s, India's economic liberalization has led to
increased interaction with the UK's mature financial markets.
● India-UK
UK Financial Partnership (IUKFP): Launched in 2014, the IUKFP aims to:
● Increase trade and investment flows.
● Support policy reforms in both countries.
● Facilitate knowledge sharing and collaboration between institutions.

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UK-India
India Financial Markets Dialogue (FMD): Established in 2021, the FMD is a platform
for government-to-government
government discussions on key area:
● Gujarat International Finance Tec (GIFT) City development.
● Banking and payment systems.
● Insurance sector cooperation
cooperation.
● Capital markets integration.

Current Situation:
India's Rise: India's financial market is growing rapidly, with a burgeoning fintech sector and
increasing foreign investment. However, its depth and size still lag behind the UK's established
market.
● Collaboration
aboration Opportunities: Both countries see potential for collaboration in areas like:
● Sovereign green bonds to fund sustainable infrastructure projects.
● Fintech innovation and regulatory frameworks.
● Cross-border
border trade and investment facilitation.
● Asset management
nagement and payment system integration.
● Growing Collaboration: The India
India-UK
UK Financial Partnership (IUKFP), launched in 2014,
fosters collaboration between the two sectors. Recent developments include the inaugural
and second Financial Markets Dialogue (FM
(FMD)
D) in 2021 and 2023 respectively.
● Gujarat International Finance Tec (GIFT) City: Developing GIFT City as a global
financial hub.
● Banking and Payments: Streamlining cross
cross-border
border transactions and financial inclusion
initiatives.
● Insurance: Regulatory harmoni
harmonization
zation and market access for insurance companies.
● Capital Markets: Enhancing cooperation in areas like mutual funds and green bonds.
● Market Size Discrepancy: The UK boasts a more established and mature financial market
compared to India's growing market. H
However,
owever, India's potential for future growth is
significant.

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Future Plans:
The India-UK
UK 2030 Roadmap emphasizes strengthening financial services cooperation.
● Deepening Networks: The IUKFP aims to further connect Indian and UK businesses and
policymakers, fostering knowledge sharing and joint ventures.
● Cross-border
border Trade and Investment: Efforts are underway to streamline regulations and
procedures for smoother ccross-border financial activities.
● Focus Areas: Future dialogues might explore new areas like asset management and
payment systems to enhance cooperation.
● 2030 Roadmap: The India
India-UK
UK 2030 Roadmap emphasizes financial cooperation as a key
pillar for strengthening
ning bilateral ties.
● Overall, the India-UK
UK financial market relationship is one of collaboration and planned
growth. By working together, they aim to leverage each other's strengths and unlock new
opportunities in the global financial landscape.
● Regular FMD
D meetings and ongoing IUKFP initiatives indicate a commitment to deeper
ties.
● Challenges like regulatory harmonization and market access need to be addressed.

Overall, the India-UK

UK financial market relationship is one of growing collaboration. Leveraging
their unique strengths, both nations can benefit from increased trade, investment flows, and
knowledge sharing in the financial sector.

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 FDIS AND ITS ROUTES
United Kingdom
E-commerce
commerce Boom and GBP as a Settlement Currency:
● 2017-2020:
2020: The rise of ee-commerce
commerce giants like Amazon and Alibaba facilitated cross-
cross
border trade, with GBP gaining traction as a settlement currency, particularly for
European and UK-based
based transactions.
● 2021-2023: E-commerce
commerce continued to flourish, with GBP maintaining its presence in
online marketplaces. However, competition from other currencies like USD and EUR for
global dominance in e-commerce
commerce payments persists.
Service Exports in GBP - A Story of Resilience:
● 2017-2018:
2018: The UK's financial and professiona
professionall services sectors saw strong growth in
exports denominated in GBP, benefiting from a skilled workforce and competitive rates
compared to some European counterparts.
● 2019-2020:
2020: Brexit uncertainties cast a shadow on service exports, with concerns about
future
re access to European markets. The COVID
COVID-19
19 pandemic further impacted travel-
travel
related services.
● 2021-2023:
2023: A gradual recovery was observed in service exports, particularly in financial
services. However, the full impact of Brexit on long
long-term
term service exports
export remains to be
seen.
Manufacturing Exports in GBP - Navigating Challenges:
● 2017: Manufacturing exports in GBP held steady, contributing significantly to the UK's
international trade.
● 2018-2020:
2020: Brexit negotiations and subsequent changes in trade regulations led to a
decline in manufacturing exports. Some companies shifted production outside the UK to
mitigate risk.
● 2021-2023:
2023: Signs of stabilization emerged as businesses adjusted to new post-Brexit
trade arrangements. However, global supply chain disruptions and the war in Ukraine
continue to pose challenges.

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Foreign Direct Investment (FDI) - A Rollercoaster Ride:
● 2017-2018:
2018: FDI into the UK remained healthy, with sectors like energy, pharmaceuticals,
ph
and infrastructure attracting investments denominated in GBP.
● 2019-2020:
2020: FDI inflows dipped due to Brexit uncertainties and the COVID-19
COVID pandemic.
● 2021-2023:
2023: A partial recovery in FDI was observed, with some focus on renewable
energy and technology
hnology sectors. However, overall FDI flows remain below pre-Brexit
pre
levels.

Shifting Methods for International Transactions in GBP:

● 2017-2018:
2018: Traditional methods like SWIFT and documentary collections dominated
international GBP transactions. Digital pa
payment
yment solutions like PayPal started gaining
traction for smaller transactions.
● 2019-2022:
2022: Increased use of FX hedging strategies and forward contracts to manage
currency fluctuations became commonplace. The pandemic accelerated the adoption of
digital payment
ent solutions for facilitating trade amid physical restrictions.
● 2023: Focus on technological solutions like blockchain for streamlining trade processes
and managing GBP transactions. Businesses are prioritizing data security and cyber risk
management for international payments in GBP.

Impact of Brexit:
The UK's exit from the European Union continues to cast a long shadow on international
business activities in GBP. New trade arrangements with the EU and other countries are still
evolving, with ongoing negotiations
otiations impacting tariffs, regulations, and overall trade flow.
Looking Ahead:
The future of international business in GBP hinges on several factors, including:
● Geopolitical stability and the war in Ukraine's impact on global markets.
● The success of the UK in building resilient supply chains and fostering new trade
partnerships.
● The continued development of ee-commerce
commerce and digital platforms for facilitating
international trade in GBP.

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 ● The UK's ability to attract FDI and establish itself as a competitive player in the global
marketplace.
INDIA
2017:
● Demonetization: The Indian government's demonetization move temporarily impacted
online transactions and cash flow, but ultimately pu
pushed
shed for a shift towards digital
payments in INR.
● Growth of UPI: The introduction of the Unified Payments Interface (UPI) by the National
Payments Corporation of India (NPCI) significantly boosted cashless transactions using
INR within India, impacting int
international
ernational business activities with an Indian connection.
● Rise of Indian E-commerce
commerce Giants: Flipkart's acquisition by Walmart and continued
growth of players like Myntra highlighted the potential of the Indian ee-commerce
commerce market,
leading to an increase in IINR transactions for online cross-border trade.
2018:
● "Make in India" Initiative Gains Traction: The Indian government's focus on promoting
domestic manufacturing ("Make in India") potentially led to a rise in INR transactions for
sourcing raw materials and components within India.
● FDI in E-commerce:
commerce: Increased FDI approvals in the ee-commerce
commerce sector may have
resulted in more foreign investment denominated in INR, impacting the overall
international business activity involving India.
● Focus on Digital Infrastru
Infrastructure:
cture: Government initiatives like "Digital India" continued to
invest in digital infrastructure like broadband and ee-commerce
commerce platforms, further
promoting INR as the preferred currency for domestic transactions impacting
international businesses in India.
2019:
● GST Implementation: The Goods and Services Tax (GST) rollout initially caused some
disruption in the Indian economy but ultimately aimed to streamline tax collection and
potentially smoothened cross
cross-border trade flows involving INR.
● Growth of Mobile Wallets: Increased adoption of mobile wallets like PhonePe and Paytm
further boosted cashless transactions using INR within India, impacting international
business activities with Indian customers.

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 ● Focus on Fintech Startups: A rise in Indian fintech start
startups
ups offering cross-border
cross payment
solutions facilitated easier international business transactions involving INR.
2020:
● COVID-19
19 Impact: The pandemic initially disrupted international trade flows, but the
surge in e-commerce
commerce led to a potential increase in INR transactions for online cross-
cross
border trade with India.
● Focus on Atmanirbhar Bharat (Self
(Self-Reliant India): The government's
ent's push for self-
self
reliance may have led to some shift in sourcing patterns, potentially impacting the flow of
INR in international business.
2021:
● PLI Schemes (Production Linked Incentive): Government initiatives offering incentives
for domestic manufacturing
uring in specific sectors (PLI schemes) might have fueled INR
transactions for sourcing and production within India.
● Export Promotion Focus: Increased government focus on promoting exports could have
led to a rise in INR transactions for outbound trade act
activities.

2022:
● Growing Startup Ecosystem: India's booming startup ecosystem attracted significant
foreign investment, potentially leading to an increase in INR transactions for domestic
operations of these startups.
● RBI Regulations on Crypto: Reserve Bank of India (RBI) regulations on cryptocurrency
may have impacted international business activities involving crypto as a form of
payment.
2023 (So Far):
● Focus on Rupee Settlement Mechanism: The recent push for a Rupee settlement
mechanism for international trade could significantly increase the use of INR for
international business activities involving India.
● Impact of Global Events: Global events like the war in Ukraine may have impacted
import-export
export flows and potentially influenced the use of INR dependin
dependingg on the nature of
trade affected.

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 EXPORT & IMPORT
POTENTIALS

The trade relationship between the United Kingdom (UK) and India has been long standing and
significant, with both countries being major players in the global economy. The export and
import potentials between these two nations are substantial, and understa
understanding
nding the dynamics of
this trade relationship is crucial for businesses and policymakers alike.

Exports from the UK to India:

Machinery and Transport Equipment: The UK is a leading exporter of machinery, including

industrial machinery, electrical machinery, and vehicles. India's rapidly growing manufacturing
sector and infrastructure development projects create a significant demand for these products.
Chemicals and
nd Pharmaceuticals: The UK has a well
well-established
established pharmaceutical industry, and
India is a major consumer of pharmaceutical products. Additionally, the UK exports a wide
range of chemical products, including industrial chemicals, to India.

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Precious Metals and
nd Gemstones: The UK is a significant exporter of precious metals, such as
gold and silver, as well as gemstones, including diamonds. India's thriving jewelry industry and
the country's cultural affinity for precious metals and gemstones make it an attractive
attract market for
UK exporters.

Professional and Technical Services: The UK is a global hub for professional services,
including legal, accounting, and consulting services. As India continues to liberalize its service
sector, there is a growing demand for th
these services from UK-based firms.
Imports from India to the UK:

Textiles and Clothing: India is a major exporter of textiles and clothing, with a rich heritage in
these industries. The UK's fashion industry and consumer demand for clothing and textile
products
ducts create a significant market for Indian exports.
Machinery and Transport Equipment: While the UK exports machinery and transport equipment
to India, it also imports a significant amount of these products from India. India's growing
manufacturing capabilities
ilities and cost advantages make it an attractive source for machinery and
transport equipment.

Gems and Jewelry: India is a leading exporter of gems and jewelry, particularly diamonds,
gold, and silver jewelry. The UK's thriving luxury goods market and tthe
he presence of major
jewelry retailers make it an important destination for Indian exports in this sector.
Information Technology (IT) and IT
IT-enabled
enabled Services: India has established itself as a global
hub for IT and IT-enabled
enabled services, such as software de
development,
velopment, business process outsourcing,
and customer support services. The UK's demand for these services creates significant import
potential from India.

Agricultural Products: India is a major exporter of agricultural products, including spices, tea,
coffee,
offee, and various fruits and vegetables. The UK's diverse culinary culture and demand for these
products create opportunities for Indian exporters.

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To facilitate and promote trade between the UK and India, both countries have signed various
agreements and
d treaties, such as the Comprehensive Economic Partnership Agreement (CEPA),
which aims to reduce tariffs and non
non-tariff
tariff barriers, and enhance cooperation in various sectors.
It is important to note that the trade relationship between the UK and India is influenced
i by
various factors, including economic conditions, trade policies, and geopolitical developments.
Businesses and policymakers must stay informed and adaptive to capitalize on the export and
import potentials between these two nations effectively.

HISTORY

-Lord and Lady Mountbatten with Gandhi

Here's a brief history of trade relations between the United Kingdom (UK) and India:

Colonial Era (1600s-1947):

- The East India Company, a British joint
joint-stock
stock company, established trade relations with India
in the early 17th century, primarily for spices, textiles, and other commodities.
- Over time, the company gained significant political and economic control over
ove large parts of
India, laying the foundation for British colonial rule.
- During the colonial period, India became a major exporter of raw materials and agricultural
products to Britain, while Britain exported manufactured goods to India.

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Post-Independence (1947-1991):
1991):
- After India gained independence in 1947, trade relations between the two countries initially
remained strong due to historical ties and the Commonwealth connection.
- However, India's adoption of a socialist economic model and import-substitution
substitution policies in the
1950s and 1960s led to a decline in trade with the UK.
- The UK remained an important export market for Indian textiles, agricultural products, and
handicrafts during this period.

Economic Liberalization (1991

(1991-present):
- In 1991, India embarked on economic reforms and liberalization, opening up its markets to
foreign trade and investment.
- This move paved the way for a resurgence in trade relations between India and the UK, as well
as other Western nations.
- The UK
K became a major investor in India, particularly in sectors such as telecommunications,
banking, and automotive industries.
- Trade in services, such as information technology (IT) and IT
IT-enabled
enabled services, also gained
prominence, with India becoming a majo
major exporter of these services to the UK.

Recent Developments:
- In 2010, the UK and India launched negotiations for a Comprehensive Economic Partnership
Agreement (CEPA) to further strengthen trade and economic ties.
- In 2021, both countries agreed to neg
negotiate
otiate an Enhanced Trade Partnership (ETP) as an interim
step towards a comprehensive free trade agreement (FTA).
- The UK's exit from the European Union (Brexit) has prompted both countries to explore new
avenues for deepening trade and investment relatio
relations.
- India and the UK are also members of the Commonwealth and have longstanding cultural and
historical ties, which continue to influence their trade relations.

Overall, the trade relationship between the UK and India has evolved significantly, from colonial
col
exploitation to a modern, mutually beneficial partnership driven by economic interests and
strategic considerations.

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What does the future look like?

The future of trade relations between the United Kingdom (UK) and India appears promising,
with both countries recognizing the immense potential for further strengthening economic ties.
Here are some key factors that could shape the future of UK
UK-India trade:

Free Trade Agreement (FTA) negotiations: The UK and India have been working towards
negotiating a comprehensive FTA since the UK's exit from the European Union. A successful
FTA could significantly boost bilateral trade by reducing tariffs, removing non-tariff
no barriers,
and enhancing cooperation in various sectors, such as services, investment, and intellectual
property rights.
Growing services trade: The services sector is likely to play a crucial role in future UK-India
UK
trade relations. India's IT, business
siness process outsourcing, and other knowledge
knowledge-based
based services are
in high demand in the UK, while the UK's strengths lie in areas such as finance, education, and
professional services. Facilitating the movement of skilled professionals and promoting digital
digit
trade could further enhance services trade between the two countries.

Renewable energy and sustainable development: With both the UK and India committed to
addressing climate change and transitioning towards a greener economy, there is significant
potential for collaboration in renewable energy, clean technology, and sustainable development

21
projects. Trade in these areas
as could increase as both countries strive to meet their environmental
goals.

Advanced manufacturing and technology: India's initiatives to boost manufacturing and

technological capabilities, such as the 'Make in India' campaign, could create opportunities
opportunitie for
UK firms to invest in these sectors and facilitate technology transfer. Conversely, UK companies
could benefit from India's skilled workforce and cost advantages in certain manufacturing
sectors.

Diversification of trade baskets: While traditional sectors

ectors like textiles, gems and jewelry, and
agricultural products will continue to play a role, both countries are likely to explore new areas
of trade. This could include emerging technologies like artificial intelligence, biotechnology, and
nanotechnology,
y, as well as sectors such as healthcare, education, and creative industries.

Strengthening supply chain resilience: The COVID-19

19 pandemic has highlighted the
importance of resilient and diversified supply chains. Both the UK and India may seek to
strengthen
hen their trade ties to ensure reliable access to essential goods and services, reducing
dependence on any single source.
However, the future of UK-India
India trade relations will also depend on factors such as geopolitical
developments, regulatory harmonizatio
harmonization, and the ability to address non-tariff
tariff barriers effectively.
Continued efforts to enhance bilateral cooperation, improve business environments, and address
challenges such as intellectual property rights protection will be crucial for realizing the full
potential of this trade partnership.

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 GOVERNMENT RESTRICTIONS ON TRADE

Licenses for Imports

Three categories of products are covered by India's non tariff regulations: restricted goods that
need an import license (such as livestock products and ce
certain
rtain chemicals); banned or prohibited
goods (such as tallow, fat, and oils of animal origin); and "canalized" goods (such as some
pharmaceuticals), which can only be imported by government trading monopolies and are
subject to cabinet approval regarding ttiming
iming and quantity. On the other hand, India frequently
disregards obligations pertaining to transparency, including notifying WTO committees or
publishing timing and quantity limitations in the Official Gazette.

India has made a distinction between new aand

nd secondhand, remanufactured, refurbished, or
reconditioned products for the purposes of entry criteria. In India, end users are permitted to
import used capital goods without a license. Without taking into account the fact that
remanufactured goods are usually
sually returned to their original working condition and adhere to the
same safety and technical standards as products made of new materials, India's official Foreign
Trade Policy classifies them in the same way as used goods. According to the National Trade
Trad
Estimate Report that USTR recently released, American exporters continue to face significant
tariff and nontariff barriers that prevent their products from being imported into India, and
American stakeholders continue to report that it has been difficult to obtain an import license for
remanufactured goods.

Certification, labeling, testing, and standards

The National Standards Body of India is the Bureau of Indian Standards (BIS), which was
founded by the Indian Government in accordance with the BIS Act of 2016. The Bureau is
concerned in the smooth growth of the activities of standardization, labeling, and quality
certification of goods. It operates under the Ministry of Consumer Affairs, Food & Public
Distribution.

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In addition, the Department of Commerce under the Ministry of Commerce and Industries
(MOCI), the Office of Legal Metrology under the Ministry of Consumer Affairs, Food, and
Public Distribution, and the Food Safety and Standards Authority of India (FSSAI), which was
established by the Food Safety and Standards Act under the Ministry of Health and Family
Welfare, regulate food safety, standards, labeling, and packaging requirements of food.

Different Kinds of Trade Barriers

● Import Licencing: Before being brought into the nation, a few types of commodities
need to get an import licence. This accomplishes a few goals:
1. Public health and safety: Imports of chemicals, pharmaceuticals, and animal and
agricultural products are subject to restrictions in order to guarantee that they adhere to
quality and safety regulations.
2. Environmental Protection: Importing goods that can endanger the environment is
prohibited by licences for hazardous materials.
3. National Security: National interests are protected by restrictions on strategic items like
defence hardware.
4. Encouraging Domestic Industry: Through licensing, the government can control the
amount of imports that could pose a threat to domestic output in certain industries.

● Import Bans: It is strictly forbi

forbidden
dden for some goods to be brought into India. These
frequently consist of:

1. Products that are considered dangerous: Items such as drugs, counterfeit items, and
toxic trash are included under this category.
2. Endangered Species: India actively takes part in gglobal
lobal initiatives to safeguard
threatened species of animals, which is why associated products are prohibited.
3. Sensitive Cultural Items: Certain historical artifacts may not be permitted for import in
order to protect cultural heritage.

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● Canalization: The import of particular items is regulated by certain government
organizations rather than by private businesses. This frequently pertains to:

1. Essential Commodities: To guarantee their supply at stable prices, the government may
restrict imports of essential goods like food grains or petroleum products.
2. Strategic Goods: Canalization, like licencing, permits more stringent regulation of the
import of goods judged essential to national security.

● Standards and Technical Barriers to Trade (TBTs): Quality and safety standards
for a range of items are established by the Bureau of Indian Standards (BIS). Although
BIS standards are optional in theory, they are frequently required for imported items.
This facilitates:

1. Standards serve to protect consume

consumers
rs by ensuring that imported goods meet a minimum
quality standard, thereby protecting their interests.
2. Encourage Fair Competition: The playing field is levelled for domestic firms by
making imported items adhere to the same standards as domestic ones.

● Anti-Dumping
Dumping Measures: To shield domestic sectors from unfair competition, India,
like many other nations, has the authority to levy tariffs on imported goods that are
deemed to be unjustly priced, or dumped.

● Restrictions on Foreign Direct Investment (FDI): The amount of foreign

ownership permitted in specific industries, such as retail, defence, and media, is regulated
by the government. This seeks to:

1. Protect Strategic Sectors: One way to protect national interests is to restrict foreign
ownership in sectors that are sensitive.
2. Promote Domestic Businesses: By preventing foreign corporations from controlling a
given industry, FDI limitations can promote the expansion of domestic pplayers.
layers.

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 Trade Restrictions in UK

With its departure from the European Union (EU) in 2020, the United Kingdom underwent a
dramatic change in its commercial relationships with other countries. The single market of the
European Union, which allowed for the free flow of capital, people, products, and services,
served as the operational foundation for the UK in the past. The UK has implemented additional
trade restrictions as well as its own autonomous trade policy in the wake of Brexit. This
examination looks at the different shapes these constraints take, why they exist, and how they
might affect the economy of the United Kingdom.

Different Kinds of Trade Barriers

Despite the UK's desire to support free trade, there are a number of restrictions in place:

● Tariffs and Customs Duties: The UK now imposes its own tariffs and customs duties on
goods imported from nations with whom it does not have a free trade agreement. The
objectives of these tariffs are:

1. Protect Domestic Industries: Tariffs can increase the cost of imported items and increase
the competitiveness of domestically produced alternatives.
2. Create Revenue: The government receives revenue from customs duties.

● Quotas: The UK occasionally imposes limits on particular items, limiting the amount
that cann be imported from a given nation. This is useful for:

1. Control Supply and Demand: Quotas might assist in guaranteeing that specific items
are sufficiently available in the domestic market.
2. Trade Deals: Quotas can be employed as a negotiating tool in discu
discussions
ssions on trade with
foreign nations.

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 ● Non-Tariff
Tariff Barriers (NTBs): These are oblique limitations that may increase the cost or
complexity of trade. As examples, consider:

1. UK regulations and standards pertaining to the safety and quality of products are unique.
un
These regulations, which may not be the same as those in other nations, must be followed
by imported products.
2. Sanitary and phytosanitary (SPS) Measures: Rules make sure agricultural and food
imports adhere to a set of safety and health requirements.
3. Technical laws and conformity assessment processes that can complicate the importation
process are known as technical barriers to trade, or TBTs.

Justification for Restrictions

Trade restrictions are used by the UK government for a number of reasons:

1. Safeguarding Home Industries: Brexit made several UK sectors more vulnerable to EU

competition. They have some leeway to adapt to the new trading environment thanks to
restrictions.
2. Upholding High Standards: The UK has strict regulations pertaining to product
prod quality
and food safety. Restrictions safeguard the health and safety of consumers by ensuring
that imported items adhere to these criteria.
3. Leverage in Negotiations: When negotiating trade agreements with foreign nations,
restrictions can be used as a negotiating tool. Reducing restrictions in return for
advantageous conditions from trading partners is something the UK can provide.
4. National Security: Trade with some nations that are judged to pose a security concern
may be restricted, as well as sensit
sensitive items.

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 Trade Restrictions Between India and the UK

India and the UK have a complicated trading relationship because of their shared history and
Commonwealth membership. Even though there are many economic opportunities, both nations
impose trade restrictions,
trictions, which makes doing business challenging. This study examines the
current status of commerce between India and the UK, looking at trade barriers, potential
advantages of free trade agreements (FTAs), and obstacles to their implementation.

The Present
sent Situation: A Labyrinth of Restrictions

An all-encompassing
encompassing FTA is still unattainable as of April 2024. Though there are still obstacles
to overcome, such as market liberalisation and visa access, negotiations are still in progress. Both
nations rely on different trade barriers in the absence of a free trade agreement (FTA):

India's Metrics:

1. Tariffs: Certain imports from the UK are subject to tariffs levied by India, increasing
their cost to Indian consumers and companies. These tariffs, which are intended
in to
safeguard domestic businesses, are especially common on vehicles and alcoholic
beverages.
2. Non-Tariff
Tariff Barriers (NTBs): India uses NTBs to control UK goods, such as strict
product standards and convoluted import procedures. For enterprises, these may
m result in
delays and bureaucratic obstacles.

UK's Metrics:

1. Customs tariffs: The UK imposed customs tariffs on Indian imports after Brexit, which
may have an effect on textile, apparel, and agricultural items. The purpose of these duties
is to protect certain UK industries and maybe to make money.

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 2. Sanitary and phytosanitary (SPS) Measures: To guarantee the security of imported
food and agricultural goods, the UK has strict SPS regulations in place. Complex
procedures, albeit required, might cause delays for exporters based in India.

Even with the present obstacles, India and the UK stand to gain greatly from a well-crafted
well free
trade agreement:

1. Reduced Tariffs: An free trade agreement (FTA) has the potential to drastically reduce
or completely remove tariffs on goods exchanged between the two nations, hence
lowering their cost to businesses and consumers. Growth in the economy and increased
trade volumes would result
sult from this.
2. Enhanced Trade Flows: Trade between India and the UK could rise significantly as a
result of lowered trade barriers. Businesses in both nations would gain from this as it
would increase their clientele and market accessibility.
3. Investment Boost: An FTA might create a more welcoming atmosphere for capital
inflows between the two nations. This would encourage cooperation across industries and
generate new employment opportunities.

Negotiation Obstacles: Filling the Void

There are obstacles too overcome on the route to an FTA:

1. Market Access Concerns: India is wary of opening up its markets to some UK goods,
especially ones that might have a detrimental effect on indigenous sectors like agriculture
and autos.
2. Visa issues: One persistent issue iiss India's unwillingness to relax visa requirements for
highly qualified UK professionals. This limits the flow of skilled labour, which may
impede innovation and teamwork.
3. Agricultural Disagreements: There are variations in how each country can access the
other's agricultural markets. The UK wants more access to the Indian market, and India
wants to safeguard its own agriculture industry.

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A View of What's Ahead

A successful trade agreement would benefit the UK and India alike, notwithstanding the
obstacles.. To fully realise the potential of their economic partnership, negotiations must continue
with the goal of resolving important issues and creating a win
win-win
win scenario. Here are a few more
things to think about:

1. Impact of "Make in India": India's "Make in India" programme, which encourages

homegrown manufacturing, may have an impact on how it approaches trade talks. There
may be a change from import prohibitions to export promotion initiatives.
2. Trade Policy Streamlining: India is now reviewing its trade policy,
icy, which could result
in a more transparent and efficient system for trade restrictions that would be
advantageous to both sides' enterprises.
3. Indo-Pacific Focus: As the Indo
Indo-Pacific
Pacific area gains significance, more robust
relationships may result.

CURRENT RECESSION AND ITS EFFECT ON TRADE

RELATIONS BETWEEN UK AND INDIA
In the last 5 years, Trade relations between the UK and India have been severely harmed by the
present recession. India is experiencing stagflation as a result of the Great slump and the
th policy
measures that followed, whereas the UK went through a more severe short
short-term
term slump. India's
significant outsourcing agreements with US companies and large export volumes to other nations
contributed to its post-global
global financial crisis recovery. Br
Brexit
exit has created more complications;
originally perceived adversely by Indian companies such as Tata, they eventually saw possible
benefits in the context of discussions for immigration laws and a UK
UK-India
India Free Trade
Agreement. With prospects in IT, ITeS, and healthcare services, India may become a sought-
sought
after location for British investments and exports after Brexit. The dynamics of commerce
between the UK and India will be further shaped by the changing UK
UK-EU
EU relationship following
Brexit. But India's trade
ade with the UK shown a surplus in exports over imports, with Indian
companies having significant outsourcing deals with US firms

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Possible Difficulties:
● Decreased Demand from the UK: Indian exports may suffer if British companies
purchase less from India as a result of a struggling UK economy.
● Investment Slowdown: When businesses tighten their belts during a recession, they may
decide to cut down on intern
international
ational investments, especially those made in India.
● Trade Deal Uncertainty: India and the UK are now negotiating a Free Trade Agreement
(FTA). The economic unrest in the UK might lead to delays or reordering of priorities,
which would shorten the deal's sschedule.
Prospective Possibilities:
● India's Robust Growth: The country's economy is expected to develop at one of the
quickest rates in the world, while the UK suffers. India may become a more alluring
market for British exporters as a result.
● UK Focus on India: A trade agreement with India is viewed by the UK government as a
possible engine of growth. They may be even more determined to complete the FTA
because of the recession.
● India's Diversification: In an effort to become less dependent on any one market, India is
aggressively looking for new trading partners. India's commercial partnerships may need
to be increasingly diversified in light of the UK's recession.
Past Year Observation
● 2017 Recession: Both India and the UK experienced a perio
periodd of slower growth around
2017 due to policy changes. This likely caused a temporary dip in trade volumes as
businesses become more cautious.
● COVID-19
19 Pandemic (2020
(2020-Present):
Present): The global pandemic significantly impacted global
trade, including India-UK
UK rela
relations.
tions. Lockdowns and travel restrictions disrupted supply
chains and dampened overall trade activity. However, there were also reports of increased
trade in certain sectors like pharmaceuticals and medical equipment.
● India-UK
UK FTA Negotiations: Throughout the last five years, India and the UK have been
negotiating a Free Trade Agreement (FTA). While not finalized as of April 2024, the
ongoing negotiations indicate a focus on strengthening trade ties despite economic
uncertainties.

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Some resources to learn m
more
ore about these events and their impact on India-
India
UK trade:
From a Recession to the COVID
COVID-19 Pandemic: Inflation–Unemployment
Unemployment Comparison between
the UK and India. The economic slowdown in 2017 and compares it to the impact of the
pandemic.
What Global Economic
omic Slowdown Means For India As UK, Japan Slip Into Recession The
news of the potential impact of the recent recessions in the UK and Japan on India's economy,
including trade relations.
UK economy: A crisis in the making for some time, with the India tr
trade
ade deal offering hope for
the UK's current economic situation and the potential benefits of a trade deal with India.

India visit by Rishi Sunak: September 2023

Prime Minister Rishi Sunak traveled to India in September 2023 in order to participate in the
G20 meeting. Mr. Sunak had a meeting with Narendra Modi at the summit. More information
about the meeting was released in a press statement by the Prime Minister's Office. According to
the press release, the prime ministers spoke about the "close and grow
growing
ing ties" that exist between
the two nations and decided to "cement a modern partnership" in commerce, innovation, and
defense technologies in order to "build on the past and focus on the future." They held a
"productive conversation" regarding the FTA neg
negotiations
otiations between the UK and India, according
to the press statement.

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