By Amrita Saha
India and the UK plan to launch the negotiations for a free trade agreement (FTA) in November 2021, with the aim of an interim agreement by March 2022. The business consultation seeking wide input across all sectors in preparation for the UK-India FTA negotiations was concluded recently. Undoubtedly, the UK-India digital space is an important feature of these talks – geared towards sharing knowledge and expertise, supporting innovation, and building capacity and skills for development. Overall, the UK-India digital trade agenda has been marked by an innovation-led approach and a knowledge-based perspective, presenting the potential for digital entrepreneurship
The concept of digital entrepreneurship ecosystem integrates the digital space with entrepreneurial ecosystems. When various stakeholders - potential customers and suppliers, universities and research centres, institutions and policy makers, large companies, innovative start-ups, and investors, collaborate and cooperate in making use of resources, then the ecosystems can be deemed as innovation driven; and, as a result, digital entrepreneurship can thrive, and also accelerate start-ups based on digital innovations.[1]
The Indian start-up ecosystem has evolved considerably, and in fact, India is now the third largest start-up ecosystem in the world - with 51 ‘unicorns’ (privately held start-up companies valued at over $1 billion), ahead of the UK (32) and Germany (18). Government policies in India such as the Startup India initiative, Jan Dhan Yojana, tax rebates and exemptions for start-ups, and the Digital India and Smart Cities initiatives have streamlined processes and supported start-ups. Fintech start-ups in particular have registered rapid growth, as companies such as PayTM have been revolutionising the digital payments landscape, and with India’s fintech market now valued at US$31 billion, it is projected to grow to US$84 billion by 2025. Having developed in the last decade, the UK on the other hand has an established ecosystem for financial services with about 89,000 finance and insurance firms, and London ranks second globally in the number of its FinTech unicorns.
Despite rapid advances, India faces infrastructure problems that include internet speed and power outages; as well as specific regulatory challenges as Indian regulators face the task of balancing building complex regulatory framework and monitoring the fast-moving Indian fintech market. This is where the mutual strengths in technology and knowledge-based businesses for UK and India in particular imply that digital trade and investments could be drivers for future growth in UK-India trade and investments.
While the UK already supports an ecosystem for start-ups incubated in India to venture into UK, India has been reciprocal and has been opening investment channels for acquisitions and joint ventures with the UK. There have also been important developments such as the UK-India Tech Partnership, agreed in 2018, aimed to identify and pair businesses, venture capital, universities and others. Grants were announced under the new Innovation Challenge Fund for “Tech Clusters” across focus areas of healthcare, environmental protection, water management, energy, future mobility, agriculture, and access to information. Indian tech firms (HCL Technologies, Mphasis, Wipro, and Infosys) announced new investment initiatives and hiring drives in the UK over the next three years to meet a surge in demand for digital services after the pandemic.
There are also other ongoing initiatives. UK-based fintech company Wise announced low cost and international money transfers from India on 1st june,2021 – enabling Indian users to send money from countries such as the UK, US, and Eurozone among others globally; to be followed by the launch of an outbound remittance service in India.
A partnership between T-Hub, a leader of India’s pioneering innovation ecosystem, with Digital Catapult supported by the UK Government’s Department for Business, Energy & Industrial Strategy and Foreign, Commonwealth and Development Office (FCDO) to boost UK-India collaborations, and ‘The UK-India Immersive Technology Sustainability Expert Group’ has been created to increase the innovation quotient between the two countries in immersive technology and towards achieving net-zero emissions target by 2050.
Hence, overall, UK-India digital entrepreneurship ecosystems are facilitating the exchange, transfer and acquisition of knowledge while also initiating new ways of doing business as start-ups thrive especially in the digital space. However, two policy issues remain especially important:
(1) The balance between privacy and innovation is an important factor for cross border data flows to achieve the full potential of UK-India digital trade. The international nature of digital start-ups make it difficult for digital entrepreneurs to operate relatively seamlessly. India is one of the largest data generating countries, and several measures and policies, such as the Reserve Bank of India (RBI) Payment Directives of 2018 and the Non-Personal Data Protection Framework 2020, have been initiated to localise and protect data.
(2) Dialogue between the government and the private sector across the UK and India directed to simplification of licensing norms for joint-venture start-ups, collaboration on Intellectual Property Rights, and creation of regulatory sandboxes and incubation programmes. These initiatives can support a joint start-up ecosystem and build on comparative strengths of the two countries, as well as support growth for Small and Medium Enterprises (SME) fintech adoption rates that are markedly lower.
To conclude, the UK is one of the global digital leaders with a well-established digital entrepreneurship ecosystem, and India is well positioned to become a leading player in this space. To overcome remaining roadblocks, and for the UK-India digital trade agenda to realise its full potential, it is important that both countries’ strategic vision converge not only in principle but also in practice - especially addressing the challenge of privacy and innovation, and further dialogue aimed at balancing regulatory practices with those established across the globe.
[1] See: Spigel, B. (2015). The relational organization of entrepreneurial ecosystems. Entrepreneurship Theory and Practice, 41(1), 49–72; and, Giones, F. and Brem, A., 2017. Digital technology entrepreneurship: A definition and research agenda. Technology Innovation Management Review, 7(5).