Ahead of today’s Commonwealth Heads of Government meeting, the Indian Prime Minister, Narendra Modi is looking to discuss India’s role in the UK’s post-Brexit trade deals.
India is a potentially attractive trade partner to the UK, as many businesses and the government themselves are looking for future export and import deals with emerging and powerful economies.
Hamish Muress from international payments company OFX, shares his views on how India can become an important market for UK companies.
India is home to a growing middle class and a young, brand-conscious population. With its total population nearing 1.3 billion, it poses a unique opportunity for small British businesses looking to build out a new export market. However, India is also a nuanced market, and one that requires a solid long-term strategy for any small business looking to succeed.
One of the biggest hurdles for UK exporters is the rupee, which over the last 12 months has weakened by about 14% against the pound. This is problematic for British businesses because it makes their products more expensive and therefore less attractive to Indian buyers. It also devalues any revenue that is repatriated from India to the UK when converted to sterling.
But small businesses should not be put off by the rupee’s short-term weakness. Many forecasts signal rupee strength for the rest of the year, with the Reserve Bank of India cutting its inflation forecasts while raising economic growth targets to a whopping 7.4%. This combination of lower inflation and higher growth should support the rupee in the second half of 2018.
At the same time, global factors such as the escalating trade sanctions between the US and China will only aid India’s economic growth, particularly given that India is less dependent on exports than its Asian competitors. A tailored currency strategy is the best way to capitalise on the rupee’s growing strength, whilst protecting small businesses against any downward trends.
Despite the rupee’s current weakness, it can still be beneficial for UK businesses to price goods in sterling when exporting to India – though this of course depends on the nature of the business, and who it is selling to. The pound is a global reserve currency, which lends it more stability and protects against some volatility.
Given the size and complexity of the Indian market, it makes sense to consult with an expert body like the UK India Business Council before moving ahead. Their website can connect small UK businesses with opportunities from Indian buyers, as well as offering clear advice on the best way to enter the market.
Recent research by OFX found that India is one of the most attractive markets for small businesses looking to begin trade outside of the European Union, ranking only slightly behind more familiar markets like the USA, Canada and Australia. With English one of India’s primary languages of commerce, it is an appealing market for trade post-Brexit – and all eyes will be on Prime Minister Modi, and any trade promises that are made this week.