India-UK Relations|ForumIAS Blog

India-UK relation (Historical Background)

East India Company (1600–1857): Trade was established between Tudor England and Mughal India in 1600 when Elizabeth I granted the newly formed East India Company a royal charter.
Following the Indian Mutiny of 1857, where Indian sepoys rebelled against their British officers, the East India Company was dissolved the following year.
British Raj (1858–1947): In 1858, the British Government assumed direct control of the territories and treaty arrangements of the former East India Company.
Opposition to British rule increased, both through violent revolutions and through nonviolent resistance which eventually led to Indian independence in 1947.
In 1950 India became a Republic and the link with the British crown was severed.
India decided to remain in the Commonwealth of Nations after becoming a Republic. Both Britain and India have since pursued quite divergent diplomatic paths.

India- UK relation in the present day context:

Indian mission in the UK: The Indian mission in the UK on May 22, 2017 organized the first community-wide anti-terrorism pledge.
The pledge is taken by Indian embassies and missions around the world to coincide with former Prime Minister Rajiv Gandhi’s death anniversary on May 21, marked as Anti-Terrorism Day in India.
The Indian High Commissioner to UK was of the opinion that the scourge of terrorism affects innocent lives not just in one country but across the globe.

Post-Brexit Britain:

India’s significance in post-Brexit Britain will depend on the terms of negotiation between the European Union and Britain.
Hard Brexit will give full power to Britain to control its borders and make new trade deals and this helps to seal the FTA between the UK and India on a priority basis.
If the UK accepts soft Brexit, then the European Union will insist on agreeing to the free movement of goods, services, capital and people.
In this scenario, there isn’t much improvement in the UK-India relation nor will India have a significant role in post soft-Brexit Britain.

Economic Relation:

India is the third largest foreign investor in the UK.
There are many bilateral trade agreements between the two nations designed to strengthen ties.
The British government has chosen India as one of its most influential trade partners because it is one of the “fastest growing economies in the world.”
The upcoming UK’s post-Brexit plan would be substantial scope for further strengthening bilateral cooperation across a range of sectors, including science & technology, finance, trade & investment, and defense & security between the two countries.

Political:

Politically, relations between India and the UK occur mostly through the multilateral organizations of which both are members, such as the Commonwealth of Nations, the World Trade Organization and the Asian Development Bank.
After becoming the Prime Minister of the United Kingdom, Cameron was actively involved in enhancing the Indian-British relationship on various dimensions, such as business, energy security, climate change, education, research, security and defense, and international relations.

Britain’s Post-Brexit opportunities in which India and the UK business relations can develop:

Getting rid of EU (European Union) regulations, Britain will be more flexible and increase trade between the two nations as a result.
GDP growth: As one of the fastest growing economies with a GDP growth projection of 42.9% (period growth at constant prices) between 2016 and 2021, there are ample investment opportunities in India.
Telecommunications: Globally, India ranked number 3 in 2016 in terms of investment in telecommunications at US$13.1 bn (constant prices), making India one of the best suitors to invest in the UK’s telecommunication sector.
Tariff free: In the absence of the EU-India free trade agreement, the UK expects to benefit from tariff free trade with India.
Export: Britain will be able to increase its exports to India by more than £2 billion per year after Brexit by cutting EU red tape.
There is significant potential for the growth in the export of pearls and precious stones from the UK to India, cars and car parts and alcohol.
Import: Imports from India to the UK will rise by around £1 billion, meaning the UK’s balance of trade will be improved.

Britain and India leading the potential to expand post-Brexit trade in the auto sector Import – Exports of cars

Exports of U.K.-made cars to India rose 8.3% in the first half of 2017, while those of Indian-made cars to the U.K. almost doubled.
The 8.3% rise in sales of U.K. cars was driven by increased demand for British-made luxury cars, while the number of India-built cars rose by 48.6%.

Opportunities for growth

There are numerous opportunities for growth in areas such as in the development of autonomous, connected vehicles, as well as in the Indian after-market segment.
Currently, U.K.
has an insignificant part of that market in India, but there are possibilities of development of lot of products.
Mutual relations seem to be developing between U.K. and India.
The prospect of increasing sales of British-made luxury cars, for which there was great demand in India, remains limited with high tariff regimes still in place.

U.K. car production industry current status

K. car production has fallen 2.9% in the first half of 2017, as demand in Britain declined, which it attributed to the current uncertainty around the Brexit negotiations.
The industry is also lowering its ambition of producing 2 million cars a year by 2020.
The U.K. automotive industry is in particularly challenging times in terms of production, new cars sales and level of investment.

Access to Single market

The Society of Motor Manufacturers and Traders (SMMT) has been pushing for interim arrangements that maintain access to the single market and customs union to avoid a cliff-edge situation.
U.K. is trying to maintain the barrier free trade and considers reverting to WTO terms would be disruptive to the supply chain.

India and the UK present day challenges:

Terrorism: In the context of Brexit, unlike the United States’ contemporary view, India continues to be hyphenated with Pakistan in London’s outlook.
India states the fact that bilateral relations went beyond the economic realm to issues such as security and terrorism were not being heeded in Britain, despite continuous efforts by India over the past decades.
Immigration: Immigration policy could stand in the way, among other things. Numbers of students from India have been declining dramatically in recent years.
Forcing international students to move back to their homeland can be detrimental to the British economy in the long term.
Totalization agreement: The UK government has also made it mandatory for people to pay a health care surcharge as part of their immigration application.
When employees are there for a short term as part of their work, it is important that they get to keep their hard-earned money rather than giving UK thousands of pounds of free money as social security taxes.
Therefore, it is important for UK and India to sign the totalization agreement at the earliest.
The totalization agreement with the UK would have exempted Indian professionals who are working for a certain period of time in the UK from paying those social security taxes if they are paying such taxes in India.