Channel: Trade

Tuesday, 07 December, 2010
India leads China in service trade with UK
Despite the continuous & sustained effort from China, India leads the service trade with UK. While India maintained its dominance, China also seems to be well on track to match its Asian peer.
Tables & Graphs

The growing realization about resurgence of India and China in western world has become a reality now and UK has recognized this well in time. The visit of UK premier David Cameroon to India & China this year clearly reflects the willingness of UK to engage with the two Asian giants with a sizeable trade & investment. The efforts are on to boost the trade with India & China and the emphasis is clearly on the weak links i.e. trade in goods for India & trade in services for China.


Despite continuous & sustained effort from China, India leads the service trade with UK. This is in stark contrast with goods trade where India trails by huge margin. Though the trend follows a very simple rule of core-competence as China & India are known to the world for goods & services expertise, the rivalry is heading for a photo finish in the coming years. China’s aggressive trade policy to establish itself ahead of India in service trade has become a growth driver for UK service trade with these Asian giants.


A look at the table showing UK export clearly reveals that China has led the British service export growth as compared to India. China’s import from UK has grown very quickly in last 2 years. The fact that growth rate in China was unlike that of witnessed in other parts of the world in 2007 & 08, registering more than 50% growth for service import from UK. India which led the British service export in 2000 now lags behind China.


Both the countries registered more than 15% growth in 2008 in service export to UK compared with 2007. While India maintained its dominance in service export to UK, China seems to be well on track to match its Asian peer with a CAGR of 20% against 16% in case of India. The only decline in Indian service export to UK took place in 2002, when service export dropped by 1Million GBP. The decline in Chinese service export to UK was witnessed in 2003 but the performance has been robust in recent years.


India witnessed 16.2% CAGR in bilateral service trade with UK from 2000-08 against 20% growth shown by China driven by heavy export by UK into China. India as service export partner to UK dropped from 21st to 24th in 2008 but China moved up by 6th position from 23rd to 17th in 2008. While India as Import partner to UK went up by one position to move to 12th, China improved by 6th position to 20th from 26th.


A look at the Balance of Service Trade (BOST) suggests that CAGR for India’s BOST with UK is 17.5%, while the figure is 29% for China. However, the noteworthy difference here is that India has positive BOST with UK unlike China. The BOST of UK with India decreased in 2008, while it increased for China. While lowest ever BOST for India UK was observed in 2008, the trade gap narrowed most in 2006 for India UK. This was the only year, when UK service export to India exceeded the import from India.


A look at the table revealing sectoral breakup of UK-BRIC service trade shows that Transport and Travel remain the major service export by UK to both India & China. While insurance & royalties are low volume service trade area for India, China is yet to catch up in IT/ITES trade with UK.


The crux of the analysis is that while India remains ahead of China in service trade with UK, the situation is very dynamic and so needs proper follow up if India has to maintain its lead over China. Moreover, as UK looks to engage itself deeply with India & China, there are untapped areas and there is growing need to recognize these through official & unofficial channels. Clearly the trade is the engine of the growth and UK cannot afford to miss the big Asian bus in this political economy world.


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