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Country Profile India

Amidst global geopolitical uncertainty, India is flexing its muscles as a major powerhouse alternative to China.

It is fiercely competing against other nearby states like Vietnam and Malaysia as companies across the world reorient their supply chains from China into countries that are seen as lower risk. The crux of this is the critical minerals race. But, as India moves closer towards elections at the start of June, Prime Minister Modi has promised to turn the country into a global manufacturing hub, transforming India’s infrastructure, fast-tracking climate and technology goals and creating high-value jobs.

India is the fifth largest economy in the world by GDP, at $3.4 trillion in 2022. Its population is 1.44 billion, having overtaken China as the world’s largest in 2023. Its top five exports are petroleum products, gems and jewellery, textiles and garments, medicines and organic chemicals. But it is set for growth in areas such as technology, fintech and automotive.

In fact, during PM Modi’s decade long tenure, GDP has grown faster than it has in key counterparts, with 7.6% growth in the third quarter of 2023. Foreign Direct Investment (FDI) has grown from $24 billion in 2013 to more than double that on average in the past three fiscal years. And in January this year, India’s stock market overtook Hong Kong’s as the world’s fourth largest by market value.

Whilst this can be partly attributed to western diversification away from China, PM Modi has been praised for leveraging digitisation to streamline business documentation, transforming a state by state taxation strategy into a national one and establishing closer ties with global leaders.

India is also especially bolstering its plans for lithium, a key component of electric vehicle batteries. Currently, India still imports a lot of its lithium. But the recent discovery of the critical mineral in its mountainous regions has shifted the dial on domestic production. New Delhi has opened the bidding process for the auction of these lithium mines.

So India is poised for growth and, according to recent opinion polls, Modi is expected to win the elections and serve as the Prime Minister for another five years.

But that’s not to say there is not a way to go. General perception is that the ease of doing business in India is not as easy as it could be. Regulation is a sticking point, with complex tax regulation, difficulties acquiring land, rigid labour laws and clogged-up courts. According to the World Bank, India is one of the slowest globally to enforce contracts in business disputes, taking four years on average. And while Modi is on balance thought of positively as a PM by the business community, some businesses have said the government’s tendency to tweak policy in response to industry lobbying does not make for a particularly predictable business environment.

The UK’s own relationship with India has been mixed for the last few years. Trade negotiations began in 2022, but have since been ‘put on ice’, and will resume once India’s elections have been completed. It has also been reported that talks have been quite difficult as both sides push for ambitious priorities. India wants better mobility for its workers particularly in IT and lower duties on its textiles exports. Britain on the other hand is asking for better access for UK professional services companies to the Indian market as well as big tariff cuts on exports of whisky and cars.

India is the UK’s 14th largest export market, with top exports including travel (£5.4 billion), other business services (£1.3 billion), metal ores and scraps (£1.3 billion), transportation (£0.7 billion) and mechanical power generators (£0.5 billion). Total UK exports to India for the four quarters to the end of Q3 2023 was £14.9 billion. With significant growth prospects on the horizon and a rising consumer base, India should be an attractive place for UK companies to do business.

Useful links:

Exporting guide to India

The Economist: How strong is India’s economy?

Peterson Institute for International Economics: India’s lithium discovery

FT: Businesses bank on Modi

About the author

image of Emma Rowland

Emma Rowland,

Policy Advisor at the Institute of Directors

Emma leads on the IoD’s policy work on international trade and EU affairs. She works with UK businesses, trade bodies and the government to advocate on behalf of IoD members on issues relating to the UK’s trading relationship with the EU, Free Trade Agreements, supply chain disruption and geopolitics.

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