Stephen Booth is Head of the Britain in the World Project at Policy Exchange.
This week’s summit between Prime Ministers Boris Johnson and Narendra Modi was a significant moment for the future of the UK-India relationship. India’s struggle against a terrible new wave of coronavirus cases meant that the Prime Minister was unable to travel to New Delhi as originally planned, and the summit was conducted virtually. Nevertheless, the two leaders agreed a “2030 Roadmap for a Comprehensive Strategic Partnership”, which provides an ambitious new framework for UK-India relations.
The modern UK-India relationship is based on a shared experience of parliamentary democracy and strong cultural links, including a common language and similar legal systems. It was Modi who coined the term “living bridge” to describe the deep people-to-people connections between the two countries, which includes the 1.6 million British nationals of Indian heritage.
Yet, over the last two decades, previous attempts by successive British governments to strengthen the UK-India relationship have tended to under-deliver on the promise of these strong foundations. This time could and should be different. Both countries have been re-evaluating their geostrategic interests and this has given the relationship fresh impetus.
Policy Exchange, the think tank I work for, presaged the Indo-Pacific “tilt” announced in the UK’s Integrated Review. And it is significant that India’s Minister of External Affairs, Dr Subrahmanyam Jaishankar, will this afternoon give a keynote address to Policy Exchange on “India and the United Kingdom in a Post-Covid World”.
Faced with the challenge of China’s rise, India is seeking deeper relationships with like-minded democracies who share an interest in building a resilient, rules-based order in the Indo-Pacific. The breadth of topics included in the 2030 Roadmap illustrates the potential for deeper UK-India collaboration across a wide spectrum of issues, including trade, health, climate, education, science and technology, space and defence. The UK will not be India’s number one partner in every area but it is one of few countries that can offer serious capabilities in all of them.
India is predicted to overtake Germany and Japan to become the world’s third largest economy by 2030. Greater access to this market has long been viewed as a major economic prize by UK governments. However, it is important that the UK can demonstrate that its ambitions for the relationship are not merely motivated by commercial benefits but reflect a strategic and credible commitment to supporting India’s increasingly important regional and global role.
Brexit has prompted a renewed focus on the UK’s economic and diplomatic relationships beyond Europe and the Integrated Review underlined India’s importance to the success of the Indo-Pacific tilt. The UK is using its rotating presidency of the G7 this year to “intensify cooperation between the world’s democratic and technologically advanced nations”. India has been invited as a guest nation, as have Australia, South Korea and South Africa. It is an important example of the increased intensity of government-to-government contact required to strengthen the relationship.
Equally, the UK’s new status outside the EU enables the UK to conclude trade agreements tailored to its priorities. Reaching a comprehensive trade deal with India is now a strategic priority, alongside accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
This week’s summit saw the launch of two new bilateral agreements, the Migration and Mobility Partnership and an Enhanced Trade Partnership.
India has long desired smoother and more open routes for its citizens to do business and study in Britain. The UK’s post-Brexit points-based immigration system has already made it easier for Indian students and high-skilled workers to do so. This week’s agreement establishes a new scheme allowing up to 3,000 Indian graduates and professionals aged 18-30 to come to the UK for a period of up to two years, and vice versa. The agreement also provides for stronger cooperation on the enforcement of immigration rules in both countries. Altogether, these steps suggest that the movement of people is unlikely to be the insurmountable barrier to a UK-India trade deal it was previously perceived to be.
Meanwhile, the Enhanced Trade Partnership is a strong signal of intent from both sides. It is a practical first step towards a comprehensive trade agreement and includes a target to double trade flows over the next decade.
In truth, the UK-India trade relationship has been underwhelming in recent years, but this means it also represents enormous untapped potential. Bilateral trade has grown from around £5 billion in 2000 to £23 billion in 2019, driven largely by increases in UK imports from India. However, this hasn’t kept pace with India’s global trade growth and, as a result, the UK now has a smaller slice of a much bigger pie. The UK has fallen from being India’s third most important trade partner in 2000 to fourteenth today.
The bilateral investment relationship is stronger. The UK was the sixth largest investor in India from 2000-2020 and Indian investment in the UK is growing. India was the second most important source of inward investment into the UK in 2019-20 and fourth in 2018-19.
Developing the trade relationship will not be straightforward. India has liberalised its economy but some international firms continue to find the business and legal environment challenging. For example, Vodafone has been embroiled in a long and complex dispute with the country’s tax authorities, which demanded €3 billion in back payments. An international arbitration court ruled in Vodafone’s favour last year, but New Delhi has since appealed against the decision.
It is sensible, then, that the Enhanced Trade Partnership should lay the groundwork for a comprehensive deal and also focus on potential early wins. The deal has already eased certification requirements for the sale of UK medical devices in India and the UK will also hope India can be persuaded to reduce its 150 per cent tariff on Scotch Whisky.
The £1 billion of deals announced this week includes a £240 million investment by the Serum Institute of India into the UK health and sciences sector in order to provide additional funding for clinical trials, vaccine development and research. The ongoing collaboration on the AstraZeneca Covid-19 vaccine – which was developed at Oxford University and produced at the Serum Institute – highlights the importance of science and research to the bilateral relationship.
Looking to the future, India offers huge opportunities as a technology and data hub and represents an obvious partner in the UK’s bid to become a “science and tech superpower.” For example, growing demand for UK infrastructure and technology services is being driven by India’s smart cities project, and India’s digital transformation offers further prospects in fintech and cyber security.
Overall, there are many reasons to believe this new era of UK-Indian relations has a far greater chance of fulfilling its potential, where others have failed.