Feature of the Week
Table 2: UK Import from BRIC countries (GBP Mn)
Table 3: UK total trade with BRIC countries (GBP Mn)
Table 4: UK Balance of Trade (BOT) with BRIC countries (GBP Mn)
Table 5: India’s performance chart (UK goods Export to BRIC)
Table 6: India’s performance chart (UK goods Import from BRIC)
As the global power balance is shifting its gears, the BRIC economic bloc (Brazil, Russia, India, China) has become increasingly important for rest of the world. Despite developed world losing their sheen to the BRICs, there has been a continuous effort to rope in the BRIC nations to stimulate the growth in the OECD countries. The emphasis of UK to enhance its economic cooperation with the BRICs is a clear reflection of this fact.
A look at the UK exports to the BRICs (Table 1) in 2010 clearly reveals that China remains the leading importer from the UK. The Chinese imports from UK have shown a very consistent growth over the years and remained unscathed from the economic recession in 2009. While India has been showing high growth in the imports from UK, the vulnerability of the imports was clearly visible in 2009 with value falling by 30%. Russia also faced the same situation but Brazil remained resilient with almost a steady value as of 2008.
UK imports from the BRICs in 2010 (Table 2) stood at around GBP 42 billion and 68% of these came from China. The year 2009 was the only year when UK imports from the BRICs fell down but the change in value was very minimal. The lesson coming out of this trend is that while UK needs to balance its imports from China, other BRIC countries include India can try to increase their exports to UK. The second largest exporter to UK is India among its BRIC counterparts but the gap between India and China is huge. India is distant second with only 13% of the UK imports from within the BRICs coming from India.
As China dominates the UK trade with BRICs, all the trends in the BRICs follow the Chinese pattern of trade with the UK. Similar to imports, the total trade (Table 3) also has followed a monotonic increase except in 2009, when it fell by 8%. China remains the largest trading partner of the UK in the BRICs registering 60% of the total trade followed by India. Despite India being the second largest trading partner of the UK in the BRICs, there is no place for any complacency. India’s trade with the UK remains only one fourth of the corresponding value for China. The lower cost and policy of free trade has helped Chinese exports to surge to such a record level. The high value is also the result of an undervalued Yuan making Chinese exports cheaper in the world market.
An analysis of India’s performance chart (Table 5) with respect to the UK exports to India shows that UK exports to India have grown at a very slow pace compared to others in the BRICs. The highest growth rate has been shown by Russia while China remains a close second in this aspect. A look at the 2009 values clearly establishes the fact that Indian imports from the UK are quite vulnerable to recession and so policy push would be required to correct this deformity. This fact is further bolstered by the frequent negative growth displayed by UK exports to India. It clearly shows that there are various market distortions which cause a lot of volatility in the bilateral trade. Another interesting fact is that while India is still not able to touch the pre-recession value of UK export to India, China and Brazil have been able to register their maximum imports from the UK in 2010.
Similar to UK exports to BRICs, the exports to the UK by BRICs is dominated by China. A look at the India’s performance chart (Table 6) shows that India is again at the bottom of the CAGR comparison chart (BRIC). Another interesting observation is that all the countries have been impacted by recession in terms of their UK imports from BRICs. It looks very obvious as UK reeled under heavy recession and that also for a very prolonged duration. The comparison of volatility among the BRIC countries shows that China has been most consistent in its exports to the UK while Russia and India both have shown frequent change of signs in terms of growth trends. Similar to UK exports to the BRICs, China and Brazil seems to have recovered fully from recession and have touched the maximum level of exports to the UK in 2010.The story remains different for India and Russia as both of them will still take some more time to touch the pre-recession period exports to the UK.
On a concluding remark it can be said that while India-UK trade has shown remarkable growth, the tigers are still far behind the dragons in the bilateral trade with UK. Going forward, the best policy would be to promote the bilateral trade in goods through business and official level discussions. What looks quite obvious is that there are impediments which have caused volatility in the trade and they also present the opportunity of an astronomical growth in the future. It remains to be seen whether India and the UK are able to realize that or it just remains the missed opportunity.
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