Against the backdrop of an uncertain global economic environment, the OECD has recently downgraded its global growth forecasts, citing that: “significant changes have occurred in trade policies that if sustained would hit global growth” and that “further fragmentation of the global economy is a key concern”.
In response to this, and in order to promote resilience and growth, as well as making the case for ambitious cross-border economic collaboration, it is now urgent that, where the potential and willingness exists to deepen bilateral trade and investment flows, those opportunities are firmly grasped and prioritised.
Batting for Growth
With India a major engine of global economic growth, and the UK Government having put economic growth at the heart of its policy agenda, there are now – more than ever – deepened opportunities for the world’s fifth and sixth largest economies to capitalise on. With a Free Tree Agreement and Bilateral Investment Treaty already on the horizon, we see an opportunity for a new phase of UK-India economic partnership, where the two are batting together for growth.
This paper coincides with the 13th UK-India Economic and Financial Dialogue (EFD) held in London and led by UK Chancellor Rachel Reeves and India’s Minister for Finance Nirmala Sitharaman. It also comes at a time when the UK-India economic corridor – as seen through the lens of trade, investment, payments, education, culture and people – is flourishing. For example, India has been the UK’s fastest growing major trade and investment partner over the last decade. Cross border payments reflect this trend.
Barclays’ UK clients saw an 18% year-on-year increase in payments to and from India in 2024. And on people flows, Indians were the largest contributors to new UK work and student visas last year.
"The UK has deep and longstanding economic relationship with India, as does Barclays. As we focus on growing the UK economy, India is an important partner. We are calling on the UK government to take onboard these policy recommendations to strengthen the UK-India Economic corridor in the interest of mutual economic growth.”
C.S. Venkatakrishnan, Group Chief Executive of Barclays
How can UK economic and trade policy towards India strengthen the UK-India Economic Corridor and contribute to the growtth mission of the UK Government?
Leveraging Barclays’ extensive operations in India, and our role as a facilitator of financial flows across the UK-India economic corridor, in this paper we seek to showcase how economic links between both countries are evolving and answer the question: How can UK economic and trade policy towards India strengthen the UK-India Economic Corridor and contribute to the growtth mission of the UK Government?
To do this, we combined openly available macroeconomic data with a unique blend of Barclays’ data and insight, obtained across all our major divisions. Overall, our analysis highlights the dynamic and growing UK-India economic partnership that is taking shape, built on complementary strengths in skills, trade, investment and innovation. We arrived at the following four key insights and related policy recommendations.
Batting for Growth: Insights
Insight 1: Trade
Over the last decade, India has been the UK’s fastest growing major trading partner.
Goods trade: The percentage of UK companies trading goods with India has scope to grow, particularly as Indian consumers pay the highest premium for UK goods exports, on average an 11.8% premium.
Services trade: UK-India services trade has been the primary driver of trade growth over the last decade. There remain considerable opportunities to grow services trade in key sectors including financial services.
Insight 2: Investment
The UK-India investment relationship is expanding quickly. India has been the fastest growing major source of investment into the UK over the last decade. Similarly, India has represented the 2nd fastest growing major destination for the UK’s outward investment.
Foreign Direct Investment: In 2023, the return on investment on UK FDI in India amounted to 12%, in the top five most profitable jurisdictions for UK investors. In the other direction, Indian investors saw a 22% return on their investments in the UK in 2023, the second most profitable of any foreign source. Despite this, UK companies in new sectors are missing out on opportunities to expand into India. Portfolio Investment: While the UK's portfolio investment in India has risen rapidly, India’s portfolio holdings of UK assets remains low.
Insight 3: People and Payments
Barclays data shows an 18% increase in payments across the UK-India corridor between 2023 and 2024. Deepening personnel, education, tourism, trade and investment ties between both countries are driving this growth. Yet, frictions preventing fully seamless payments remain.
Insight 4: Government Architecture
India and the UK have a comprehensive range of mechanisms and forums to facilitate economic, financial and trade cooperation. Forums are however held with differing degrees of regularity, and have space for deepened business involvement.
Our policy recommendations
How can UK economic and trade policy towards India strengthen the UK-India Economic Corridor and contribute to the growth mission of the UK Government? We have recommended a number of policy changes and directives:
Policy Recommendations : Trade
1A: Capitalising on recent momentum in trade growth, work expeditiously towards the conclusion of a UK-India Free Trade
Agreement and in parallel improve bilateral trade in goods facilitation.
1B: Ensure regular and coordinated policy cooperation on services trade, including in financial services
Policy Recommendations: Investment
2A: Deliver an ambitious and modern UK-India Bilateral Investment Treaty that deepens investment flows in both directions.
2B: Build awareness and understanding of each other’s markets through a more structured programme of investment facilitation and promotion events.
2C: Work with India’s Gujarat International Finance Tec-City (GIFT City) to explore how to incentivise deepened portfolio flows in both directions, supporting investor access to the Indian, UK and global market.
2D: Evaluate what non-tax benefits might promote Global Indians to expand their investment in the UK.
Policy Recommendations: People and Payments
3. Reduce friction in the UK-India payments corridor, as a first step towards greater interoperability.
Policy Recommendation: Government Architecture
4. Ensure consistent and robust implementation of existing government-led mechanisms that facilitate economic cooperation, bringing in UK and Indian businesses to the centre of discussions.
Download the report
About the author
Barclays’ Group Policy Development team creates public policy thought leadership content on behalf of Barclays. Our work draws on the bank’s expertise, data and insights, and is intended to inform the design and application of public policy solutions in response to pressing economic and societal challenges.
More from our UK unlocked series
Our expert insights on the economic and business issues most critical to the UK's companies and policy leaders.
Retail access to Corporate bonds
In our report, “Retail access to Corporate bonds”, we have combined our experience as an advisor to corporates issuing bonds, our role supporting the placement of those issuances and our position as a provider of retail investor solutions and wealth management advice and services, to consider whether these proposals will be effective.
