London Eye: Indian investment in UK matches Punjab

Two sets of figures, that perhaps ought to be wildly apart, now stand identical. The GDP of Punjab stands at Rs 5.4 lakh crore. That, according to the new annual report by the company Grant Thornton that measures investments between India and Britain, is now the same as the turnover of less than a thousand Indian companies in Britain, at 54 billion pounds.

Seen one way, this marks a welcome global expansion of Indian companies into world-class competitive production and performance abroad. Seen another, it's a heavy flight of Indian capital abroad that could have been invested into growth and jobs back home.

Seen from British eyes, this attraction of wealth into Britain is something clearly to be embraced. British Minister for Investment Lord Gerry Grimstone predicted happily for Britain that this level of investment is expected to double by the end of the decade. Not many are counting on Punjab's GDP to double over this period. This means that all of Punjab cannot at present generate as much wealth as a few hundred Indian companies in Britain.

By the end of the decade more of these may generate twice as much unless Punjab could grow dramatically. Or any other state in India; Punjab at present offers a tempting parallel because it offers figures equal to the turnover of Indian companies in the UK. But clearly, this level of growth is not matched anywhere within India.

With an India-UK free trade deal due to be signed by Diwali this year, the "biggest deal is yet to come," said Grimstone at the launch.

Indian investment into Britain is rising fast. "Despite Brexit, the investment footprint of Indian companies into the UK has increased," Anuj Chande, head of the South Asia Group at Grant Thornton tells CNBC-TV18. "From 850 Indian companies that we had last year we now have 900 companies with a combined turnover of 54.4 billion pounds, compared to 50.3 billion pounds last year."

These companies now employ more than 140,000 people, which is an increase of nearly 20 percent over last year's, says the company’s annual 'tracker' report for 2022, produced in collaboration with the Confederation of Indian Industry (CII). "It's been a dramatic increase in the investment footprint in all sorts of areas," says Chande.

Indian officials in Britain do not see this as a flight of capital. High Commissioner Gaitri Issar Kumar welcomed the growing investment. New investment worth a billion pounds had been announced during Prime Minister Boris Johnson"s visit to India last month. "The inside information is that most of that is from India into the UK, so congratulations for that," Kumar said at the launch of the report.

Grant Thornton says Indian companies have long been setting footprints abroad, even if the footprints have not been as large as now, or striding outwards faster. "Indian companies have historically been global in nature," Chandru Iyer, head of South Asia business development at Grant Thornton tells CNBC-TV18. "A lot of Indian businesses have done wonderfully well in their home market, but there comes a time when they will look at greener pastures, and where they will get their next growth story."

This is not about the flight of capital, says Iyer, "it’s about capital investment into this country to create jobs". But this does mean more growth and more jobs for Britain where these companies undoubtedly see greener pastures.

And Indian companies are seeing greener pastures out of traditional destinations such as London; more and more Indian companies are now setting up in the British Midlands and further north. Indian companies are diversifying away also from the traditional dominance in IT.

For many of these companies, the outward expansion into Britain has come to add to, and not instead of, growth of business back home. "Their Indian story is equally good," says Iyer. The expansion into Britain is following business logic, he says.

Investment the other way from Britain into India is equally significant, Iyer says. Last year the company found that British companies had created about 400,000 jobs in India, he says, and the revenue they have generated is significant. The next few years, he says, will be a "watershed moment" for an increase in investments in both directions.