Feature of the Week

Tuesday, April 26, 2011
India-UK Trade & Investment in 2010
Tables & Graphs
 

The year 2010 has been a very fruitful year for the India-UK relationship.With the visit of UK premier to India and signing of multibillion dollar defence deals the flavor of new bonhomie between the two countries looks clearly visible.With the emerging economies growing at a faster pace than their western counterparts,it has become crucial for the developed world to have strong trade ties with these countries. The new warmth between India and UK should be seen in this light only.


The bilateral trade (goods) between India and UK touched (Table 1) an all-time high of GBP 9.3bn, a growth of 30% over 2009 trade. After the dip in 2009, it was important for both the countries to see an upward movement in the trade value.The UK export to India was GBP 3.95 bn, slightly lower than its 2008 value unlike India’s export to UK which touched an all-time high of GBP 5.44 bn. The export from UK to India which registered a CAGR of 16.4% from 2004 to 2008 however is likely to have a steep growth as India-EU FTA comes into the play.

 

Natural pearls(Table 2)remain the number one export from UK to India.The bear share of exports was of natural pearls, precious and semi precious stones and metals and jewellery with 40.94% of the total exports to India. Next to them was power generating machinery and equipment with 14.13% of the total share.

 

The imports of UK from India(Table 3) have grown at a CAGR of 16.2% from 2004 to 2008. In 2010, UK imported goods worth GBP 5.44 bn from India. The list of top 20 commodities imported by UK from India prominently include Apparel, Nuclear reactor,mineral fuels,pearls and electrical machinery. The import registered a growth of 26% in the year 2010.

 

From the perspective of UK investment in India (Table4)year 2010 turned out to be a better year registering 40% growth.UK FDI in India has shown dismal figures in last few years but in the year 2010 UK looked like rebuilding its investment in India. The table clearly reveals that UK is trying to restore its pre-recession investment level in India. For the calendar year 2010, the UK investment in India has increased to $749 million against $469 million recorded last year. The increase is encouraging as FDI in India in the corresponding period has declined by 23%. With the increase in investment, UK share(Table 5) in India bound FDI has gone up to 3.5% from 1.7% observed in 2009.The increase in investment level not only shows the recovery in UK economy but also brings in focus the emphasis of UK government to widen the business engagement with India. Clearly the companies missing emerging markets like India will be at disadvantage.

 

Among European nations, UK is clearly the largest investor in India. It is closely followed by Netherlands, Cyprus, Germany and France. However the presence of Cyprus in the top investors’ list is purely due to its preferential tax treaty with India. It should not be treated as the ultimate source of FDI.

 

In cumulative terms, UK has thus far invested USD 6.35bn in the time period Apr 2000 – Dec 2010 accounting for about 5% of India’s total FDI received in this period. Mauritius accounts for 42% of foreign investments into India. Clearly a number of UK investments could also be flowing through Mauritius into India but that is fairly difficult to ascertain.

 

So from both Trade & Investment perspective, India-UK relation has strengthened in 2010.As the two countries look all set to bolster their relationship, trade & investment levels are expected to reach new milestones in the years to come. Despite having many trade barriers, it is imperative now that both the countries put emphasis on bilateral engagement to bring prosperity through concerted mutual effort.

 
 

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