This week, the UK and Indian Governments are convening in London to hold the 13th Economic and Financial Dialogue (EFD), with UK Chancellor Rachel Reeves and India’s Minister for Finance Nirmala Sitharaman leading the meeting.
A huge opportunity for both nations
We currently find ourselves in a rapidly changing global economic and trade environment, and the Economic and Financial Dialogue represents a meeting of the world’s fifth and sixth largest economies. Ahead of the meeting, Barclays has issued a new report, ‘Batting for Growth: The UK-India Economic Corridor’.
The report, which you can read in full here, explores the economic relationship between the UK and India, and suggests range of policy recommendations, which would allow both nations to capitalise on the strength of the UK-India economic partnership.
Welcoming the report, C.S. Venkatakrishnan, Group Chief Executive of Barclays said: “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.”
He continued: “This year’s UK-India Economic Financial Dialogue marks a new phase of economic partnership between the two countries, but we believe there is more that can be done. 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.”
‘Batting for Growth: The UK-India Economic Corridor’ focuses on four key areas of the relationship, with key insights and policy recommendations related to each one.
India is the UK’s fastest growing trade partner, but more firms need to take advantage of this growing market
In 2024, total UK-India goods trade amounted to £17.8 billion, a 34% increase on pre-Covid levels in 2019. Services trade amounted to over £24 billion, a doubling in just three years. And over the last ten years, India has been the UK’s fastest growing major trading partner.
This chimes with Barclays’ previous research, which shows that not only do Indian consumers show a strong preference for UK goods, but they are willing to pay an average 11.8 per cent premium to get them.
However, awareness about the lucrative prospects of the Indian market is low among UK companies, with only 7.3 per cent of UK exporters currently selling to India.
Policy Recommendation
Finalise a UK-India Free Trade Agreement: The UK and India should look to accelerate negotiations of a Free Trade Agreement, and, as part of that, the UK government should also look to improve the ease of trading with India, including through initiatives that embrace electronic trade documents and digitisation. This will allow UK exporters to take advantage of the growth advantages presented by India, including the higher willingness to pay for UK goods.
India - UK investment has grown rapidly, but there is more to do
Between 2013 and 2023, India was the UK’s fastest growing investment partner, and the UK’s Foreign Direct Investment in India ranks as one of its five most profitable destinations. Similarly, investments into the UK from India were the second most profitable of any major inward investor into the UK.
But, despite this fast investment growth and the profitability of investments, both sides can still do more. As shown in ‘Batting for Growth: The UK-India Economic Corridor’, there is a significant opportunity to strengthen two-way investment flows, especially if a new UK-India Bilateral Investment Treaty (BIT) is agreed.
Policy Recommendations
1. Create a new and ambitious UK-India Bilateral Investment Treaty (BIT)
In 2017, the previous BIT was terminated, and Barclays recommends both sides work quickly towards completing a new one. This treaty should incorporate both FDI and portfolio flows, minimise the number of sectors carve-outs to areas related to national security, and simplify regulatory and legal steps, with the ultimate aim of deepening investment flows.
2. Build awareness and understanding
In the next few years, the UK Government should actively and more systematically work to deliver more opportunities for UK politicians and senior officials to engage large Indian businesses. Part of this engagement should also mean both countries publicly showcasing business success stories between the two nations.
3. Take advantage of the opportunities in GIFT City
Gujarat International Finance Tec-City (GIFT City) is an ongoing project which is aiming to build an international financial services centre in India. Given India’s efforts to build out infrastructure across the country, and the need to deepen capital markets, both the UK and India should work with GIFT City to unlock greater cross-border investment flows.
4. The UK should refresh its offer for high net worth individuals
In recent months, the UK Government has put in place changes in its tax regime for non-UK domiciled individuals. In order to stay competitive, Barclays recommends that the non-tax benefits on offer to high-net-worth individuals (HNWIs) – including Indian HNWIs – is refreshed.
Other countries provide examples of similar measures: for example, the US offers HNWIs a 'gold card' and the UAE has an expedited business registration process.
Frictions are preventing fully seamless payments and impacting cross-border investment flows
Payment flows between the UK and India have increased substantially in recent years. Data from Barclays’ Business Prosperity Index shows that payments across the UK-India corridor between 2023 and 2024 have increased by 18 per cent. That increase was driven by a 33 per cent increase in payments from India to the UK, with a five percent increase coming in the other direction.
At the same time, two-way frictions are slowing down the growth of the payments corridor, with potential impact on underlying economic activity.
Policy Recommendation
Work together to reduce friction in the UK-India payments corridor.
As part of ongoing commitments to deepen financial policy collaboration, UK government officials should collaborate with Indian officials to minimise compliance issues as well as sharing information to continually improve payments-related regulatory regimes.
Government-to-government collaboration is broad, but could be held more consistently
Dialogue between UK and Indian industry and government bodies is in good shape, but it could be made more consistent. Some collaborations, such as the Financial Markets Dialogue, have been held three times in the last four years, but others are more ad-hoc, with the flagship CEO Forum established by Prime Ministers not meeting since 2016.
Policy recommendation
Ensure UK-India government mechanisms and forums are held consistently. Confirm that that established mechanisms are still relevant and that there is follow through from senior dialogue to business to help progress commercial activities.
You can read ‘Batting for Growth: The UK-India Economic Corridor’ in full here.
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.
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