In this interview, Kevin McCole, the Managing Director of UK India Business Council, takes stock of the prevailing trade ties between the two countries. McCole speaks with confidence about the renewed focus on the attainment of a comprehensive Free Trade Agreement (FTA) between India and the UK. UKIBC is primarily concerned with the promotion of partnerships and commercial relations between the two countries.
Diplomatist: In your experience as Managing Director at the UK India Business Council in the UK, how would you characterise the trade relationship between UK and India?
Kevin McCole: The UK-India trading relationship is one built on reciprocity and complementarity. Our countries are the fifth and sixth large economies in the world, both are leading democracies, and our industrial strengths fit well together.
For two countries so geographically distant, the trade and investment relationship is hugely impressive. In the year before the pandemic total trade grew 10% to GBP 24 billion, and plans are in place that will see it double by 2030. At the same time, the UK is among the top investors in India and India is among the top investors in the UK. There are around 600 UK companies in India with a combined turnover of around INR 3,390 billion (approx. GBP 33 billion), and directly employing 416,000 people. And there are around 850 Indian companies in the UK, with combined revenues of £51billion (approx. INR 5100 billion), and employing 116,000 people.
Although geographically distant, the UK and India are connected by the ‘living bridge’ of people that work, study and live between the two countries. And we both have lots to gain by working together, from sharing manufacturing excellence and capacity, to digital innovation and services, to life science and healthcare, and education too.
The relationship is only getting stronger. I can honestly say in the 16 years or so that I have been working on UK-India trade and investment, the bilateral relationship has never been better. The enthusiasm and commitment from both business and Government has been phenomenal and the relationship is in a great place as a result.
Diplomatist: How does UK India Business Council encourage trade between the two countries? Can you describe its role for its members?
Kevin McCole: The UK India Business Council (UKIBC) is an advocacy and strategic advisory business, with a mission to build economic prosperity in the UK and India.
Our advocacy supports businesses to make the case for Government reforms and actions that grow UK-India trade and investment. Our strategic advice and tactical support help businesses enter, understand, and expand in India and the UK.
There are enormous opportunities in India, but it is not always an easy place to operate. So we draw on our knowledge and strong connections with the Central and State Governments to help companies understand the regulatory environment, how each State operates, how to find the right partners, and where in India to focus.
A major strength of our work is working with businesses and governments across India to identify and implement the reforms that will help the Indian economy grow, making it an even more attractive investment destination.
Similarly, Indian companies are finding the UK to be an increasingly complex market due to Brexit and the devolution that started with Scotland, Wales and Northern Ireland and has continued with elected mayors in major UK cities. So we use our knowledge and networks in the UK to help Indian companies make the most of the brilliant opportunities in the UK.
Diplomatist: What have been the major milestones since the UKIBC was established?
Kevin McCole: The UKIBC was founded in 2007. Since then, we have grown and evolved as the UK-India trade relationship has grown and evolved.
Over the last decade or so both Governments have increased the intensity of their engagement. It is striking that the last three UK Prime Ministers made India their first bilateral visit on becoming PM. David Cameron visited in July 2010, along with 5 Cabinet colleagues and a large business delegation. Theresa May visited in November 2016 to share top-billing with Mr Modi at the UK-India Tech Summit. And Boris Johnson was due to visit Delhi in January and April this year but had to postpone due to the pandemic.
Of course, Mr Modi has been to the UK twice, and his November 2015 speech to a packed Wembley Stadium will live long in the memory.
As the political engagement has grown, as India has become more open to ease of doing business improvements and economic reform, and as State Governments have become more engaged with businesses, the UKIBC has developed as a leading business-to-government advocacy organisation.
Whether it is our Sector Advocacy Groups, our role as Secretariat to the CEO Forum (which reports to the PMs) and the Joint Economic and Trade Committee (which reports to the Commerce/Trade Ministers), or our programme of engagements with State Governments across India, we play a central role in connecting businesses to the top of Government.
The increased proactivity of Indian State Governments over the last 6 or 7 years has led to the UKIBC signing, and delivering MOUs with Maharashtra, Telengana, Gujarat, West Bengal and Tamil Nadu. Mirroring this, UK city regions have been developing India engagement strategies, and the UKIBC has been lucky enough to work with them all – Manchester, Leeds, Sheffield, Leicester and the West Midlands. For me, this State and City Region activity shows just how far the UK-India relationship has developed and how seriously each country takes the other.
Diplomatist: When Prime Ministers Boris Johnson and Narendra Modi met virtually for the India-UK Summit, they welcomed the launch of the “Enhanced Trade Partnership,” aiming to double trade volume by 2030. Could you talk a bit about the key highlights of India-UK Vision 2030?
Kevin McCole: The 2030 roadmap is built on five priority areas: Climate change; healthcare; defence and security; trade and investment; and people-to-people links – the living bridge – which bring so much energy, vitality and innovation to the relationship. All five are relevant to businesses, and business will be important in the success of all five.
The overarching target of doubling bilateral trade is ambitious and right. The UK and India are great partners yet there is still much-untapped potential. The signing of the UK-India Enhanced Trade Partnership is the first step in achieving these objectives.
There are three elements of the ETP that I particularly like.
First, it addresses market access and regulatory issues on an immediate and ongoing basis. Removing barriers one by one, and not working on the basis that nothing is agreed until everything is agreed. Working in this pragmatic way, issue by issue, win by win, will build the confidence and momentum that will be vital to secure a comprehensive FTA.
It is also welcome that the ETP is future-proofed. Alongside the growth in goods trade, we expect significant growth in services trade. Particularly the technology, digital, financial, and IP-rich services where the UK and India are globally competitive and where there is scope for far greater bilateral activity. By focusing, now, on the trade of the future, the UK-India ETP and FTA can be a model for all trade deals that follow.
The third element of the announcements that caught my eye is the assertive timetable, with both governments committing to completing their pre-negotiation scoping by the end of this year. Indeed, the UK government has already launched its business consultation at the end of May, which we are supporting as mentioned. The ball is very much rolling.
Diplomatist: How in your opinion, both countries can work together in areas such as vaccine development and genome sequencing?
Kevin McCole: It is clear that international collaboration will be vital to successful vaccine development, production and deployment. That is relevant for the UK and India. Both countries have world-leading science bases and complementary strengths. With the UK’s track record in drug discovery, and India’s manufacturing and clinical trials capacity.
Of course, perhaps the best and best-known covid collaboration is the Oxford University-Astra Zeneca vaccine manufactured in Pune by the Serum Institute of India. This, I think, is a perfect example of how we have worked together, combining the UK and Indian R&D and manufacturing capability.
What I think we are seeing now, as a result of the pandemic, and what I would like to see more of is a blending of these relative strengths: the UK’s drug manufacturing capacity expanding, partly through Indian investment; and Indian-UK co-discovery of pharmaceuticals.
Diplomatist: How UK and India are expanding cooperation in the Indo-Pacific region?
Kevin McCole: The UK Government has, in its own words, given its foreign policy an “Indo pacific tilt”. And as the key India-UK bilateral themes of climate change, healthcare, defence and security, and trade and investment could and should all have relevance in the wider region, the UK and India will be key allies in the region. Of course, the relationship with China is an important issue too, as Mr Johnson laid out at the G7 Summit in Cornwall, so the UK and India expanding cooperation, together with members of the G7 can only be a good thing. Already we are cooperating on defence, for example, with the new UK aircraft carrier HMS Queen Elizabeth sailing to the Indian Ocean.
The UK Government announced on the 22nd of June its intention to negotiate with member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Though India is not a part of the CPTPP, the simultaneous negotiations between the UK and India and between the UK and the CPTPP is clear evidence of the Indo-Pacific tilt in action.
In a new UKIBC Report ‘Road to a UK-India Free Trade Agreement Enhancing the Partnership and achieving Self-Reliance’, one of five recommendations that we make is that India should increase its efforts to expand trade and investment collaboration in Asia so that it can benefit from increasingly friction-free trade across the region, particularly with ASEAN, which is a region increasingly rich in consumers and manufacturers. By giving global manufacturers improved access to the whole of Asia, India will become an even stronger magnet for investors.
As the Indo-Pacific will, I think, be very much the economic and geopolitical region of the 21st century thanks to its extraordinary growth, it is only right that the UK focuses its attention there. It is equally as right that the UK seeks to do with India, its closest partner in the region.
Diplomatist: Obviously, India is interested in expanding its access to the UK market in a number of sectors, including agri-food, pharmaceuticals, etc. What are the prospects of British investments in India?
Kevin McCole: India is, overall, an attractive market for UK companies. That’s evident in the huge number of companies that are already there. India is already one of the world’s largest economies and is set to grow the fastest of any major economy in coming years, and is expected to be the world’s third-biggest economy and third-biggest consumer market by 2030. We can therefore expect UK investments to grow, across a whole range of sectors, particularly those tech- and IP-rich sectors where the UK excels.
For example, I spoke very recently to a brilliant UK company, De La Rue, the world’s leading currency manufacturer which partners with something like 150 Governments and central banks across the globe. They have plans to set up a manufacturing facility in India so as to supply not just India but global markets with currency. This would transfer world-leading technology to India, create high-quality manufacturing jobs, and grow India’s exports. This is just one of many exciting investments being planned.
While I am optimistic, it is still not the case that India is an easy market to enter or operate in and the ongoing tax disputes that major companies have with the Government of India are being closely followed by major corporates across the world – investors are watching eagerly to see if the Government of India accepts the international arbitration decisions in favour of Vodafone and Cairn. If it does accept the decisions, the Government will send a hugely positive message to the international investor community: India is an investor-friendly country and the “legacy” issues of “tax terrorism” inherited in 2014 by PM Modi have been dealt with. This would be a powerful statement.
Diplomatist: How in your opinion, businesses between the two countries dealt with Covid-19?
Kevin McCole: The way that businesses have been able to adapt to new ways of working and new priorities has been extremely impressive. But not just impressive, it’s been important. Businesses have been playing a significant role in the response, including the provision of medical equipment and other crucial supplies, donations, shelter, and more.
For example, Diageo provided eight million bottles of sanitizer to help protect frontline healthcare workers in the first wave last year and has since pledged GBP4.5m to provide infrastructure and equipment to support India’s COVID-19 response in the second wave. Standard Chartered pledged INR 5 crore (US$ 0.7 million) towards fighting the spread of COVID-19 in India and covered the rations and essentials of almost 70,000 vulnerable beneficiaries. TVS Motor Company pledged INR 25 crore (US$3.5 million) to the PM’s Relief Fund. Additionally, JCB has been supporting communities around its plants in Ballabhgarh, Jaipur, and Pune by providing meals to vulnerable communities, and has been procuring PPEs, testing kits and medicines. And much more.
Diplomatist: What are the challenges you are foreseeing for the economies of UK and India, and also for the bilateral trade between the two countries? How can they overcome these challenges?
Kevin McCole: The most obvious challenge is the coronavirus pandemic, which hit both economies hard. Relatedly, vaccine rollout is a challenge because as we know there are currently not enough vaccines for the world’s population. So working together to help both our countries to get vaccinated is complicated but I think a challenge that can be overcome through perseverance and trust.
I also think that it is important that governments around the world resist the temptation to use the pandemic as cover for taking protectionism measures. India, in its self-reliant India campaign, is aiming to play a greater role in manufacturing supply chains. To succeed, India will need to be an import as well as an export hub, so keeping tariffs and other barriers to entry low will really help Mr Modi achieve this objective.
Beyond recovering from the pandemic, climate change is going to be a challenge for decades and will shape not only the energy and processes we use but investment behaviour. On the climate, India has been pivotal in the last 5 years, not least in setting up the Global Solar alliance. India’s energy transition strategy will make a huge difference, not just in India, but will set an exciting example for the rest of the world. For example, on electric vehicles, waste to energy, as well as solar and wind power. Climate change is a global challenge, but it is absolutely an opportunity. Particularly for India and its technology and engineering businesses.