Brexit may lower India-UK investment flows: India Inc

Yet, it remains sanguine that the UK will make renewed efforts to strengthen ties with countries of the Commonwealth group and India stands to gain given its own growth performance and a much better regulatory and business environment. 

The respondents were hopeful that this can be an opportunity for India and UK to make renewed efforts to strengthen ties. While the full impact of the UK move to ‘Leave’ from the European Union will take some time to unfold, the Ficci survey sought to gauge the sentiment among the Indian companies having operations in or doing business with the UK. 

Some of the companies surveyed share deep trade and investment linkages with the UK. Responses were received from about 45 companies covering sectors such as education, information technology, tyres, pharmaceuticals, steel and steel products, automotive, textiles, apparel, financial services etc.

Respondents feel that the ‘Brexit’ transition may lead to moderation in investments flows to the UK from India. However, India is expected to get continued attention from the investors including investments from the UK. UK is third largest investor in India and accounts for about 8.0% of the total FDI inflows in the country. 

In fact, several British companies have exhibited interests in India post launch of the Make in India campaign. The Government has considerably liberalised the FDI regime in the country and there has been an increase in FDI inflows over the last two years. This trend is expected to continue. 

The respondents stated that given the strengths of the economy it may be worthwhile to look at a bilateral FTA with the UK and this should focus on goods, services as well as investments. It is felt that UK may now take a less rigid stand (compared to the EU) and it may be worth pursuing a broad based bilateral agreement. 

Further, it is important that such an instrument is a hybrid agreement that incorporates the movement of people as a natural corollary to the movement of goods, capital and services so that the impact on mobility of professionals and on ICT sector is not as negatively impacted as anticipated.

About 63 per cent of the participants indicated that signing a comprehensive FTA with the UK (on goods, services and investments) may help to mitigate any negative impact of Brexit on India. For example, if India enters into an agreement with the UK that leads to the legal services market opening up, then this could lessen the negative impact of Brexit on India-UK bilateral relations.