Keeping pace with India’s frontrunners: UK firms shift up a gear

Posted on 3 Apr 2012

India represents a huge opportunity for British manufacturers across a range of
sub-sectors in which they already excel. Peter Russell, head of manufacturing,
UK sector coverage at Royal Bank of Scotland, looks at key strategic export and
growth opportunities over the coming five years.

After China, India is the world’s second fastest growing economy. UK exports to India have grown from £2.7bn in 2006 to £3.5bn in 2010. Exports grew by 45% year-on-year in 2011, while the UK government aims to double bilateral trade with India, its largest export market outside the European Union (EU), by 2015. Just under a third of UK manufacturers anticipate growing their export sales to India over the next 12 months, while nearly four in 10 expect growth over the next five years according to the 2012 EEF/RBS Manufacturing Focus Survey.

Ranjana Mirchandani, head of global transaction services origination new inbounds, RBS India, describes a confident, ambitious country: “The Indian government is committed to delivering economic reforms aimed at attracting foreign investment,” she says. “Continued deregulation, privatisation and trade liberalisation demonstrate India’s recognition of the part it must play to provide the kind of business environment that companies will welcome.”

Time for a concerted push

According to Barry Lowen, director of UK Trade & Investment (UKTI) in India, the world is beating a 50 path to India’s door. Nevertheless, UK manufacturers may not be exploiting opportunities to their full potential, leaving them vulnerable to European or Asian competitors. “It surprises me that some British firms which are ideally placed to export to India haven’t yet done so,” he says. “Some may perceive cultural or historic barriers which they wouldn’t encounter in non-Commonwealth markets like, say, China, but which can easily be overcome. Others may simply just be too modest about the quality and appeal of their products.”

Ready for UK PLC - India's key strategic industry sectors
Ready for UK PLC – India’s key strategic industry sectors

Some of those manufacturers would benefit from a greater awareness of UK government support available. “Many British exporters and producers successfully tap into invaluable networks of customers and knowledgeable contacts via UKTI and other trade bodies,” says Ranjana Mirchanani. ‘Their services cater for both companies which haven’t yet traded in India and those which have customers in established industrial and commercial centres but now seek new opportunities elsewhere.”

Old friendships, new alliances

Long-standing trading links may provide a welcome backdrop for British manufacturers exporting to India – but modern-day concerns must be addressed; securing Indian business requires recognising an increasingly value-conscious and priceconscious customer base.

Lowen says the ‘Made in Britain’ marquee is highly respected: “Indian businesspeople and the country’s own trade officials both acknowledge and admire the UK’s strengths in production and design. They’re also reassured that British companies understand the nature and challenges of conducting cross-border business.” Indeed, this is increasingly important for Indian customers themselves aiming to expand globally, who want partnerships with companies and people who can anticipate and address issues around everything from red tape and tariffs to logistics and marketing. “Collaboration isn’t just about making the most of British technical excellence, or modifying specifications for Indian or international markets,” adds Lowen. “It’s frequently about leveraging from the global reputation of specific brands.”

Richard Heald, chief executive of the UK India Business Council (UKIBC), says “Companies in advanced engineering, aviation and aerospace, offer an abundance of opportunities. British-made components, equipment and machinery are in high demand. UK companies are increasingly encouraged to establish production facilities, supply chains and distribution hubs here; for many, it’s a natural next step.”

And India’s growth industries are certainly well-positioned for British exporters and producers to take advantage over the coming five years: India’s flourishing car-making industry is a good example of one of those sectors. Companies such as Tata Motors and Mahindra & Mahindra rank amongst the country’s largest manufacturers. Foreign producers like Land Rover, BMW, Hyundai, Volkswagen and General Motors now have Indian manufacturing or assembly plants, the products of which are exported globally while meeting rising domestic demand. “The return on investment that can be enjoyed through establishing a manufacturing base in India, and the quality of India’s own manufacturing expertise, are proving increasingly attractive to UK car-makers,” says Ranjana Mirchandani. “There are a number of highly successful joint ventures; British expertise and reputation for quality in precision engineering, prototyping and automated production command high premiums.”

Emerging cities destinations for entrepreneurs and investors
Emerging cities destinations for entrepreneurs and investors

Other sectors have yet to fully mature (in some cases globally, as well as in India), creating opportunities for UK firms to quickly establish themselves. “Biotechnology and pharmaceuticals are top priorities for the Indian government,” says Lowen. “An increasingly affluent middle class means greater demand for drugs and pharmaceuticals in India itself, but there’s also huge potential for India to grow its share of the global biotechnology market. The nature of the products calls for the highest standards of research, testing, safety and production; many Indian companies – for the moment anyway – can envisage greater returns for investment from working in partnership with established players from the UK and elsewhere.”

Capitalising on regional potential

Maharashtra, Gujarat, Tamil Madu and Andhra Pradesh are the states enjoying fastest economic development, with growth focused on ‘metro cities’ such as Mumbai, New Delhi, Chennai or Bangalore. But as India urbanises and rural populations migrate, second-tier cities are emerging in other states, with corresponding increases in personal disposable income and aspirations, as well as appetites amongst businesses for investment. “Less developed regions won’t currently be as intensively pursued as the major industrial centres,” says Heald. “There’s great scope for UK firms with Indian companies, complementing deep local knowledge and business contacts with production facilities, technical back-up and distribution know-how.” These locations may not necessarily appeal to the risk-averse – but for British manufacturers looking for huge potential in up-and-coming cities that welcome foreign business, there’s plenty of scope: India certainly welcomes joint ventures, with few constraints outside sensitive sectors (like defence).

“The feasibility and appeal of joint ventures naturally depends on commercial considerations,” says Heald. “Selecting the right partner takes time, and there will be competition from other companies seeking similar alliances. But the right people can open doors to contacts with substantial purchasing power, and advise on the pros and cons of different opportunities.” Whatever turns the global economic recovery might take, India will be strategically central to growth for many UK manufacturers, with UK export finance playing an increasing prominent role in the region.

A relentless focus on evolving customer needs, a proud, consistent promotion of British innovation and production excellence, and, of course, a degree of calculated risk, should position the sector’s exports well for the coming five years and beyond.