British businesses lured by India’s ‘golden opportunities’

India’s large workforce and improving infrastructure have made it an enticing place to invest
India’s large workforce and improving infrastructure have made it an enticing place to invest
FRANCIS MASCARENHAS/REUTERS

Britain is the largest western investor in India, with businesses channelling $26 billion into the country in the past 18 years.

Companies based in the UK contributed 7 per cent of all foreign direct investment into India last year as their expenditure grew by $847 million, according to research by the CBI, the lobby group, and Grant Thornton, the accounting firm.

British businesses, particularly manufacturers, services providers and retailers, have been increasing their presence in India over recent years. This is partly because of the country’s large workforce, improving infrastructure and the business-friendly policies implemented under Narendra Modi, its prime minister since 2014.

Foreign direct investment is when companies buy capital, such as factories or machines, in a foreign country or purchase assets or shares that give investors control in a foreign business.

Increasing corporate investment is welcome news for Britain’s trade relations with India as it looks to its trading partners outside of the European Union before Brexit in March. Both the UK and EU have said that they want to increase trade flows with India.

British investment in India is ahead of that of the United States and the Netherlands, which contribute 6 per cent to the total. In the EU, the UK invests more than Germany, which contributes 3 per cent, and France, which represents 2 per cent. Worldwide, Britain is behind only Mauritius, Singapore and Japan.

The report, Sterling Assets: Britain Meets India, said that about 40 per cent of British companies had made new investments in India last year, creating more than 50,000 new jobs. British firms are believed to have created about 423,000 jobs in India since 2000.

“There’s no question that India will be a vital trading partner as the UK charts a new future out the EU,” Shehla Hasan, CBI director for India, said. She said that there was a “golden opportunity” for UK companies thanks to economic reforms that she said made India more attractive to entrepreneurs and established businesses.

More than half of British companies operating in India are in the services sector, such as restaurants and hotels, while about a third are manufacturers, which include factories. The chemicals industry has received the lion’s share of British investment in India since 2000 at $12 billion, followed by the drugs and pharmaceuticals sector, at $8.8 billion, and services, at $7 billion.

Since 2000, the state of Maharashtra, where Mumbai is located, has attracted the largest share of British investment.

Central bank chief quits
Urjit Patel resigned as government of India’s central bank on Monday (Callum Jones writes). Mr Patel, who has been grappling with ministerial criticism of the bank’s policies, cited “personal reasons” for his departure.

Raghuram Rajan, a former reserve bank governor, raised concerns over the “impasse” that had pushed his successor to quit. He said: “I think this is something all Indians should be concerned about because strength of our institution is really important.”

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