Theresa May’s First Trade Mission To India Critically Important: Analysts

UK Prime Minister Theresa May’s first trade mission to India is seen as critically important for both the countries as UK currently looks beyond Europe and India’s fastest economic growth is forecasted to continue in 2017 and 2018. The industry analysts feel that the investor friendly policies of the Indian Government led by Prime Minister Narendra Modi are designed to leverage this growth and the high priority visit of May will include a review of the India-UK Strategic Partnership designed to foster greater economic and commercial relations.

UK's new prime minister, who took over soon after the country's proposal to exit European Union, is visiting India this week.

A number of small and medium size businesses are said to be accompanying the UK prime minister on the trip and the delegation is expected to be keen to tap into India’s impressive growth story. There are two key points here worth noting which illustrate perfectly the fundamentals and the opportunity at play, says Sanjay Sachdev, executive chairman of ZyFin, an asset management and advisory firm focused on the high growth segment of emerging market ETFs.

Firstly, in 2007 India’s GDP crossed $1 trillion. However, in only a further 8 years GDP doubled to $2 trillion in 2015.India’s GDP is now forecast to more than double to $5 trillion by 2025 with the growth rate hovering around 8 per cent for the next couple of years. Crucially, this economic growth is underpinned by long-term democratic ideals and a stable government intent on delivering stimulating reforms such as The Goods and Services Tax Bill, which we believe, will add an additional 1-2 per cent to GDP once its impact is felt, says Sachdev.

Secondly, India enjoys advantageous demographics with 65 per cent of the country’s 1.3 billion people under the age of 35. This vast working population is getting increasingly wealthy, in turn driving a middle-income consumer growth story. India’s private consumption expenditure is expected to grow from $1 trillion in 2015 to around $1.8 trillion by 2025.

Nevertheless, it is worth noting that India is the only major emerging market driven by domestic consumption. So unlike its BRIC counterparts which rely on exports, India is protected from global shocks. India’s interest rates, which are currently relatively high given the stable inflation scenario, are inversely correlated to the US and are trending downwards. Reserve Bank of India has underlined its commitment to this dovish stance and UK will not want to miss the opportunity to boost trade relations with India, industry experts feel.