New routes into Indian market for UK SMEs

A new agreement between UK Export Finance (UKEF) and HSBC India will pave the way for a financing programme to support UK exporters hoping to enter this market, the UK government has said.

The two organisations have signed a Letter of Intent outlining their ambition to establish a financing programme under UKEF’s Standard Buyer Loan Guarantee (SBLG) programme. This would unlock up to £100 million in potential loans, allowing Indian buyers to purchase UK goods and services.

Commenting on the initiative, Stuart Tait, Head of Commercial Banking at HSBC UK, said: “HSBC UK has a strong relationship with UKEF, supporting British exporters to achieve their global ambitions. As one of the world’s leading international banks, we’re uniquely positioned to support the growth of trade and investment between India and the UK.

“We look forward to helping UK businesses tap into more opportunities – using our global network to bridge customers, cultures and economies.”

In its Autumn Statement, the UK government confirmed that it will offer additional support to help SMEs access global markets through UK Export Finance.

Around 7,500 SMEs from the UK export to India, one of the UK’s closest trading partners.

 

Economic recovery remains strong, new figures show

India’s economic recovery remained strong in the third quarter of 2023, boosted by solid urban demand despite a global slowdown hitting export growth, according to a Reuters poll of economists.

Gross domestic product (GDP) growth is forecast to have slowed to median 6.8% in the July-September quarter from 7.8% in the previous quarter, according to the forecasts of 55 economists polled in November.

The forecasters said that consumer demand, which contributes about 60% of GDP growth, remained strong, largely driven by India’s large metropolitan centres.

The economists predicted rate of GDP growth in the third quarter ranged from 5.6% to 7.4%.

“Headline growth likely remained resilient… with utilities, services and construction showing robust growth. Domestic demand remains the key economic driver of activity, as external demand continues to remain weak,’ Rahul Bajoria at Barclays told the Reuters survey.

India GDP growth is forecast to average 6.4% this fiscal year ending 31 March and 6.3% in the following year, driven partly by higher government capital expenditure, according to the wider Reuters poll.

Reuters said that the “expected growth would easily outpace most other economies, many of which have slowed dramatically following a historic series of central bank interest rate rises to tame inflation. The Reserve Bank of India’s efforts have been mild by comparison.”

It added: “Capital expenditure was 4.91 trillion Indian rupees ($58.98 billion) in the first six months of the fiscal year, higher than 3.43 trillion rupees in the same period a year earlier. Economists predict capital spending will climb even higher in the run-up to a national election slated for May 2024.”

When asked to identify the primary driver of economic growth for the remainder of this fiscal year, 14 of the 55 economists surveyed named government spending, while 13 said increased consumption.

Reuters’ report accompanying the survey said: “But consumer demand is not uniform across the world’s most populous country, which contains some of the biggest cities globally. Two-thirds of Indians live outside of cities.

“While rural demand took a hit in the July-September quarter due to higher prices for everyday items, urban demand held strong. However, weakness in rural demand is expected to be short-lived.”

Upasana Chachra, chief India economist at Morgan Stanley, commented: “We expect private consumption growth to recover further as it narrows the gap between rural and urban demand and between goods and services.”

Chachra said an improvement in purchasing power as core inflation moderates would help rural consumption.