Jan:Feb 2017 Credit Management magazine

COUNTRY FOCUS
continued from page 33
>
2.9 road deaths per 100,000 population, India has 16.6
per 100,000 population – to be fair, it’s not as bad as
Libya’s 73.4 per 100,000); this means planning for poor
distribution and logistics as much of India is very rural.
Indeed, India has only 1,300 km of fast roads compared
to 77,000 km in the US, and 112,000 km in China. India
also doesn’t have any high-speed trains, most averaging
under 100km/hour. There are also distinct extremes
of weather to contend with – very hot summers and
seriously wet monsoon seasons, both of which can affect
business.
BLOSSOMING ECONOMY
Post-independence from the UK, India’s economy was
riven with state interference and socialist – inspired
policies which meant that for some 30 years, per capita
income only rose by around one percent per year.
However, since the mid-80’s the economy has been
opened up and liberalised and is progressing well to
being a free-market economy.
The IMF reckons that following growth of 7.3 percent
in 2014, India’s GDP grew by about 7.3 percent in
2015 and it is forecasting growth of about 7.5 percent
for 2016. Compare that to the UK’s Office for National
Statistics (ONS) prediction of 2.2 percent growth for
2016.
To get to where it is, the country has removed the
most of its trade barriers to improve the business
environment. Example changes include reducing tariffs
to an average of 13 percent in 2014/5 from an average of
71 percent in 1993; removing of quantitative restrictions
on imports in 2001; and opening up the economy to
foreign businesses and allowing overseas investment in
many sectors.
India is now considered to have huge investment
potential in areas including life sciences, manufacturing,
energy and infrastructure. To illustrate the point, India
has, the UK Government believes, the third largest
biotech industry in the Asia Pacific region which is
expected to be worth $100 billion by 2025.
TRADING TERMS
The European Commission considers India to currently
be the fastest growing economy in the world and a
strategic partner. To further this, the EU and India
are presently negotiating a Free Trade Agreement, a
process that started in 2007. Almost ten years on, the
process is still ongoing and discussions are currently
focused on issues that include improved market access
for some goods and services, government procurement,
investment protection rules, and sustainable
development. Of course, how this will apply once Brexit
fully happens is unknown.
While the EU/India negotiations plod on, it’s
certainly worth highlighting that the UK and India
are closely linked in bilateral trade which, in 2014,
according to a November 2015 ONS report, was valued
at £19.1 billion. Broken down, official figures suggest
that in 2014 the UK exported goods worth £6.6 billion
and services valued at £2.2 billion to India.
UK Government data notes that the UK exports
much to India including non-ferrous metals (mainly
silver), non-metallic mineral manufactures (mainly
gems and jewellery), power generating machinery
and equipment, metalliferous ores and metal scrap,
general industrial machinery and equipment, electrical
machinery and appliances, professional, scientific and
controlling instruments and apparatus, and transport
equipment and machinery specialised for particular
industries.
When looking at services exports, the UK is strong
in travel and transport, business services such as
consulting and publishing, and financial services.
The UK’s investments in the country represent
around nine percent of India’s foreign investment
inflow – the main areas of interest are chemicals,
pharmaceuticals and services sectors.
34 January / February 2017 www.cicm.com
The recognised standard