When David Cameron announced last year that the UK would aim to double bilateral trade with India by 2015, it seemed an ambitious target.
Yet this aspiration can become a reality as long as UK businesses choose to become part of India’s growth story – which has only just begun.
Bilateral trade between India and the UK stands at more than £11bn, although the bulk flows from India to Britain. While the UK’s exports to India rose by more than two-thirds between 2004 and 2009, it still exports more to Sweden than to India.
And yet by 2020, India is expected to overtake China as the world’s fastest-growing economy. The country’s 50m-strong market of English-speaking, middle-class consumers is predicted to multiply tenfold over the next 15 years, creating a huge opportunity for UK companies to tap into this surge in demand for infrastructure, technology, education, consumer goods, media and services.
The attraction of India for UK businesses is also underscored by the two countries’ shared history and deep investment links, as well as the large Indian community in the UK. Of course the ties run both ways. India is already one of the largest foreign investors into the UK, and Tata Group is Britain’s largest manufacturing employer.
It is not easy to enter a new market such as India, especially for small and mid-sized companies that experience constant pressure on management resources, but the opportunities for those doing so are enormous. Indeed, many of the barriers to entry that deterred UK businesses in the past have been pulled down, and practical help is available from UK Trade & Investment.
While there are opportunities in India in almost every sector, some areas stand out as particularly well suited to Britain.
The infrastructure sector, which India is rapidly scaling up to sustain its economic growth, holds huge potential. Its government is projected to invest £600bn in infrastructure projects over the next few years, from roads and railways to the urban built environment, all areas in which the UK has a world-class reputation.
The manufacturing sector is developing rapidly too, led by companies such as Bharat Forge, Tata Motors and Mahindra. This expansion provides opportunities for British engineering firms, many of which have developed successful high-end technology operations in India.
Likewise, the country’s £30bn healthcare industry is expected to grow quickly over the next few years, creating opportunities for UK businesses specialising in pharmaceuticals, advanced healthcare delivery, diagnostics and medical equipment. Further opportunities are emerging in e-healthcare, training and clinical research.
There are opportunities in the services sector too. India aims to train 500m people and provide an additional 40m university places by 2022, opening up a vast market for UK skills providers, which already have an enviable reputation in India. British businesses can offer new business models and expertise in collaborations such as linking academies with private sector companies.
The entertainment and media sector, meanwhile – fuelled by rising income levels among India’s youth – is expected to be worth £15bn by 2014, creating another lucrative market, this time for UK technology and content businesses.
All said, anyone investing in India must take the time to study the business environment. It is not really a single market, but a series of interconnected regional markets where the legislative and investment climate may change from one state to another. Gujarat and West Bengal sit on opposite ends of the political spectrum, while Noida and New Delhi, although only a few miles apart, operate in different states. Investors must compare local laws, government incentives, the available infrastructure and the workforces.
It is also important for investors to understand there are great opportunities beyond the big Indian metropolises. Second- and third-tier cities such as Ahmedabad, Vadodara, Coimbatore and Pune are growing at a faster rate than the main cities. They are less costly and competitive, have less traffic and are frequently more “business friendly” with full wireless and broadband connectivity, while offering the same young, educated workforces as the big cities.
It is often believed that trade barriers in India remain the main obstacle for businesses. In fact, the country has come a long way since 1991, when financial and economic reforms began. Today, 100 per cent foreign direct investment is permitted in most sectors of the economy, and government ministers from the UK and India work closely together to shape the regulatory environment. When it comes to India, the opportunities are there for those companies that are prepared to grab them.
The writer is chairwoman of the UK India Business Council and a former secretary of state for trade and industry