India and the UK, the 5th and 6th largest economy globally, have been close partners in economic progress for a long. The successive UK Government has chosen India as a strategic partner because it is one of the fastest-growing economies in the world. With a healthy 6.5% growth expected in the economy during 2022-23 against a global growth expected of around 2.5%, India is truly like an oasis in the desert.
The two countries are currently negotiating a bilateral Free Trade Agreement (FTA) with the objective of expanding and exploring engagement in other sectors which have remained untapped so far. The need to expand avenues for cooperation is being felt since the bilateral economic relationship in recent years has not been able to keep pace with the fast-growing Indian economy. During 2017- 22, bilateral merchandise trade recorded a growth of around 20% only as against a growth of 35% achieved in India’s global trade during the same period. The share of India‘s trade with the UK was 1.69% in 2021-22, a reduction from 1.89% recorded in 2017-18. On the investment front, the UK has slipped from 3rd to 6th
rank during the last five years among the largest investors in India.
The annual Foreign Direct Investment (FDI) inflows from the UK to India have remained static at around US$ 1.5 billion since 2014-15, although the total annual FDI equity inflows to India from all
countries have grown from US$ 30 billion to US$ 58.7 billion during the same period. However, the growth of India’s multinational companies in the last two decades contributed greatly to UK’s business and economy, placing India as the second-largest source of Foreign Direct Investment (FDI) after the US in the UK in 2020.