Channel: Trade

April 9, 2010
India-UK services trade: comparison with other nations
India is the only country outside the EU zone and one of five countries to record a trade surplus amongst Britain’s top 20 service industry trading partners.
Tables & Graphs
India is the only country outside the EU zone and one of five countries to record a trade surplus amongst Britain’s top 20 service industry trading partners. India recorded a GBP 401m surplus with the UK in the year 2008. Spain recorded the most surplus with the UK, mostly as a result of the large number of British tourists visiting the country every year and spending on other tourism related industries.
 
Although India does record a trade surplus with the UK, but with a total trade volume of GBP 4.05b it is only its 15th largest services industry trading partner much behind its top trading partner which is the United States with which Britain achieved a total trade of GBP 54.8b.

The Indian service export to UK, mainly consists of Travel & Tourism, Transport, IT/ITES, Other Business services and Communication services, while UK exports to India mainly include Transport, Travel, Other Business services, Financial services and Communication services.
 
A careful look at the league table of British export partners (Table 3) shows that India is only the 24th top export service market for UK companies and the fact that India has slipped down to this rank from its previous rank of 21 is cause of concern for many in the UK. The reasons behind it are many and that is a topic for a completely separate in-depth analysis but in short there are three main reasons for this performance. Firstly certain sectors, such as financial, legal services and others continue to face regulatory and market entry hurdles. Secondly the Indian market may not have matured to absorb services that are offered by UK’s industry. The third reason is more to do with the business models that UK companies are adopting in selling services to the Indian market. This third point is something that the industry can work upon to improve their performance.

India on the other hand is Britain’s 12th largest import partner (Table 2). UK for decades has been a service driven economy whilst India only became one predominantly in the last decade and has done well to climb the ranks by making it into the top trading partners in services sector.  Indian service exporters can however take pride that in the league tables it is ahead of China which is not only a net importer of services from the UK but also records a trade deficit.
 
India is also Britain’s top emerging markets trading partner followed by China. These are the only emerging market economies amongst the top 20 trading partners of UK. The UK has had more success in exporting services to China than it has in India. China moved up the ranks from 23rd position to the 17th largest export market for the UK. UK exported GBP 2471m worth of services to China in the year 2008 which is GBP 644m more than it did to India.

In the reverse direction Indian exports of services to the UK are almost double than those of China. Indian companies exported GBP 2228m of services to the UK in 2008 compared to GBP 1272m by the Chinese companies. But here as well China recorded a 6 notch rise from 26th position to 20th compared to India that moved up just one notch from position number 13 in 2007 to 12th in 2008.
 
The conclusion is that whilst the India-UK services trade is growing at a healthy pace the growth is one sided in favour of India. UK companies have to work much harder to gain a greater foothold in the large and growing services market in India.
 

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