Anuj Chande explains how the signing of the free trade agreement should make it easier for mid-market companies in the UK to establish or expand their presence in the country.

The UK government regards India as an incredibly important international partner and both countries have stated that they want to establish “a comprehensive” strategic partnership, which includes the negotiation of a free trade agreement (FTA).

India is a massive market to grow a business: a skilled young workforce with rising spending power. It has the largest youth population in the world and consumption is set to double by 2030, and in 2022/23 year ending in March, bilateral trade between the countries was USD 20.42 billion dollars - up by 16.6% year-on-year. That's why large corporates have been targeting it for years. But, as well as opportunities there are significant barriers, which have made access much harder for the mid-market. 

The results from our recent Business Outlook Tracker (BOT) survey show that smaller companies do have concerns about the practicalities of investing in India:

  • High tariffs and protectionist policies: 38.54% 

  • Infrastructure: 36.8% 

  • Ease of doing business: 36.03% 

 The FTA is set to change this. Tariff-reduction is central to the negotiations and the Indian government is spending money on improving infrastructure. The National Infrastructure Pipeline is central to to its plans to improve services for people and companies and achieve its aim of becoming a USD 5 trillion economy by 2025. These improvements will potentially double the current capacity of the UK-India trade corridor. 

Results from our research show that such a huge surge in investment is realistic, with 72% of mid-market companies also telling us that the FTA is likely to encourage them to move into India.

What can India offer the mid-market?  

There are opportunities across the market in the world's fifth largest economy, but the focal sectors for both countries are finance, health, and education. Technology is undoubted the biggest draw, with much back-end work continuing to be outsourced to India. The Indian government is committed to ensuring the population remains at the forefront of this industry through dedicated training platforms: including Digital India and Skills India.

What do mid-market companies need to know about investing in India?

To succeed in India you'll need a clear market-entry strategy. You'll also need to think about what scale of growth you're looking at. Understanding the economy can help you plan effectively. Technology is concentrated in the southern states, for example around Bangalore, in Karnataka, whereas we see more food production in the north-east.

Even after the FTA is signed, you'll still have to negotiate significant regulatory complexities. That's a universal challenge when investing in any foreign market. 

The Department for Business and Trade (DBT) is well-positioned to provide support, but for expertise tailored to the mid-market you can also speak to our South Asia Group.

For insight and guidance, get in touch with Anuj Chande