Enablers and Obstacles for UK-India Trade: Banks and Diasporas

India is the UK's most important trading partner within the Commonwealth, accounting for nearly a quarter of Commonwealth imports. Yet as a proportion of either country's total trade, UK-India trade is small. For instance, India accounts for 2% of total UK imports against China at 7%. This three-year project, co-designed with non-academic partner the Federation of Indian Chambers of Commerce and Industry (FICCI), will investigate why this is the case by examining two areas which shape UK-India trade: the role of credit for export-oriented small Indian manufacturing firms, and the role of UK-India diasporic networks in shaping UK-India supply chains and trade.

Theme one focuses on credit access for Small and Medium Enterprises (SMEs). Small firms constitute 95% of industrial units, account for 40% of total value addition in manufacturing and 35% of exports. Firms' growth is strongly shaped by access to credit, and a key concern is whether SMEs are credit constrained, as reflected in the Reserve Bank of India's priority sector lending targets, but there is little evidence on this topic because most studies in India are based on datasets for larger, mostly listed firms which report audit information. We intend to analyse purpose-collected survey data to study SME credit constraints and the implications for exports.

Theme two focuses on how UK-India diasporic links shape trade and supply chains for Indian manufacturers. Despite its size and potential, systematic studies of how the diaspora supports trade and the relationship between it and formal trade policies, are missing. Gaps include how exactly diasporic networks currently facilitate trade, and what types of formal and informal diasporic networks are most significant in aiding trade between the two countries. We aim to understand what type of information is shared as well as most significant in increasing trade between Indian and UK firms. This would include insights into how Indian firms receive information about what, how and with whom to do business. These questions have policy implications because designing supportive policies to strengthen trade between the two depends on understanding how exactly diasporic networks do and can strengthen trade.

Data suited to answering both questions do not currently exist, so a major project-objective is to undertake two surveys with Indian manufacturing firms. The first, focused on SMEs, will gather detailed information about their needs and experiences of seeking credit from banks and informal sources. The second will gather information on diasporic networks from firms in the textile and garments sector, spanning small, medium and large firms. This survey will also undertake a small number of qualitative interviews with firm owners to probe the role of diasporic networks in depth.

Dissemination and impact are key project planks. Our findings will be of value to academic audiences (trade economists, firm management, scholars of diasporas, global supply chains) and non-academic ones alike (trade and industry-focused civil servants, policy figures responsible for UK-India bilateral trade relations, business and finance media, UK-India bilateral investment). The project will leverage the significant networks of the King's India Institute, King's Business School and FICCI to involve Indian and UK civil servants, bankers, corporate leaders and academics. A select number have agreed to be part of a project advisory group who will shape the project directly. We will share project progress and findings more widely at dissemination events: a workshop in Bangalore in May 2022 and London conference in January 2023. Finally, the project will create significant outputs: publications (5 journal articles and a co-edited volume); two survey datasets that will be made publicly available via the UK Data Service, and a number of policy papers/blogs to be disseminated via a project website, other blogs, newspaper columns and social media.

Stakeholders and target audiences:

1) Business: Collaboratively executing the project with FICCI UK will ensure a) our research is co-designed with interests of end users in mind, especially firms in the India-UK trade corridor b) findings are disseminated to a wider business community.
2) Governments: UK-India trade will be policy-urgent post-Brexit in the UK, and questions of growth and employment in manufacturing and export sectors are major policy priorities of the Modi government. The project offers new evidence to inform policies to enhance trade on both sides.
3) Public commentators: amidst growing media interest in UK-India trade in both countries amidst Brexit and India's multilateral trading partnerships (e.g. Regional Comprehensive Economic Partnership), our research will help understand informal and formal factors that shape UK-India trading relations.

Pathways to impact include:

1) Co-production of research
2) Engagement with non-academic business and government users
3) Dissemination to public audiences

FICCI UK will co-design and execute the two surveys with the academic leads. The January 2021 workshop in Delhi organised with Indian team member Prof Gulshan Sachdeva at the Centre for European Studies (CES), Jawaharlal Nehru University will discuss the survey design jointly with academics, business, and government stakeholders. Two further workshops will be held with academic and non-academic end-users, at IIM Bangalore and at KCL, and both will include a public event. The London event will be organised jointly with the (ESRC-funded) UK in a Changing Europe (UKICE). Our relations with UKICE and JNU's CES will ensure that the project is well plugged into ongoing dialogues about the implications of Brexit for India-UK and India-EU trade.

The KCL-based team will develop a training module on the KCL-run UK-India trade for the Foreign and Commonwealth Office (FCO)'s South Asia Diplomatic Academy (SADA).
A project website will host: workshop proceedings, working papers, links to project datasets, blog posts. The team will also write op-eds and blogs on public platforms (e.g. UKICE, IdeasforIndia, The Asia Dialogue, India in Transition at Pennsylvania University).

Team Networks, Skills, Capacities

The King's India Institute (KII), King's Business School (KBS) and UKICE have deep relations and convening power with media, government, business in the UK, and IIM-B, FICCI and JNU's CES likewise do in India. At KCL: interaction with UK and Indian government officials through the FCO's executive education programmes, MA programmes for IAS officers (via Govt of India's Dept of Personnel & Training); strong links with FICCI (who have sponsored residential fellowships for policy officials) and the UK-India Business Council; contact with the High Commission of India (UK). KBS hosts leading figures in UK-India economic relations (most recently Raghuram Rajan) and policy-relevant events. KII is also a partner on a Horizon 2020, European Commission funded Marie Curie European PhD Training Network on Global India.

IIM-B is a thought leader in India's business ecosystem with deep links and partnerships across business, government and media: with Goldman Sachs; civil sector organizations (e.g. Michael and Susan Dell Foundation); government departments (e.g. Ministry of Skills Development and Entrepreneurship, Niti Aayog). IIM-B's Centre of Public Policy, in partnership with Govt of India runs the Mahatma Gandhi National Fellowship.

FICCI UK, India's oldest apex business organisation, is closely engaged with UK-India bilateral discussions on barriers and enablers to trade. Their involvement in the project is central to our impact strategy in India and the UK.
Finally, the project's Senior Advisory Committee (see Case for Support) will bring together senior academics and practitioners to inform the research, support dissemination, and identify strategies for achieving influence and reach.