India: a priority market for the UK
Rita Tahilramani and James Thom, Co-Managers of abrdn New India Investment Trust, explore how India’s dynamic domestic growth and rising global influence are creating long-term opportunities for UK investors, as highlighted by the recent UK-India trade delegation.
Duration: 5 Mins
Date: 10 Nov 2025
When Prime Minister Sir Keir Starmer made his high-profile trip to India in October, he was accompanied by the largest-ever trade delegation from the UK. It included 125 CEOs, entrepreneurs, university vice chancellors and culture leaders. It was a significant moment for Anglo-Indian relations but also demonstrated the growing importance of India on the global stage.
His trip was heralded as “a vibrant new era of India-UK partnership”. Blue-chip companies, such as Rolls-Royce, British Telecom, Diageo, London Stock Exchange Group and British Airways, joined the delegation in expectation that the trip would deliver opportunities for them to grow and expand into the Indian market. The trip builds on the UK-India trade deal in July, which promised to raise bilateral trade by £25.5 billion per year, with UK exports to India projected to grow by nearly 60%.
The partnership is welcome for both the UK and India. Both countries need to diversify their trading relationships at a time when US tariffs are disrupting their exports. The two countries should both reap the benefits of closer economic and political ties. Equally, the UK-India deal is symbolic in that it shows India’s rising economic power, with global leaders jostling to do business there. They recognise India’s economic growth potential, a key selling point for investment in the country’s stock market.
Economic momentum
However, while the trip brings India centre stage and may spark interest in investing there, we shouldn’t lose sight of the fact that from a purely economic standpoint India is first and foremost a domestic consumption-driven story. Approximately 80% of the Indian economy is domestically oriented with net exports only a fraction of Indian GDP. Even if the UK-India trade deal delivers on its promise, it won’t meaningfully move the dial from India’s standpoint. Only around 3.3% of India’s exports end up here, equivalent to $14bn.
The good news, however, is that India’s long term domestic economic growth story remains very much intact, with a growth rate of 6-7%, a faster clip than peers such as China and other emerging markets. We see most of this growth being generated in the domestic economy. We deliberately have relatively low exposure to Indian exporters. This is partly because of the impact of tariffs, but also because the Indian domestic story is far more exciting.
For example, during his visit, Keir Starmer stayed in the 5-star luxury Taj Mahal Hotel in Mumbai. The hotel is owned by Indian Hotels, which is a holding for the portfolio. The group is benefiting from growing international interest in India. There has been a rebound in foreign tourist arrivals, as part of India’s appeal as a MICE (Meetings, Incentives, Conferences, and Exhibitions) destination. Key cities like Delhi, Bangalore, Chennai, and Hyderabad are seeing strong demand for business travel, while leisure destinations like Goa and Rajasthan are also performing well.
However, the real interest for us in Indian Hotels was not passing prime ministers, but in the multi-year growth potential from the domestic travel industry, where growing wealth is pushing consumers to seek out premium experiences and services. Travel and tourism are also among the fastest-growing economic sectors in India and domestic tourism has sustained the sector post-pandemic.
Another area of growth is in the domestic banking sector, which is helping support India’s economic growth by broadening financial inclusion and corporate lending. HDFC Bank is one of the largest holdings in the trust and is well positioned for opportunities arising from the structural growth of financial services in India.
The worries over the impact of tariffs, and some short-term concerns over the strength of consumer spending have seen the Indian market pull back since the start of the year. This is welcome. It had been expanding at a breathtaking pace, and valuations had started to look stretched in some areas. While there has been some slowdown in earnings growth in the short-term, the long-term growth story remains as powerful as ever and this represents a clear opportunity to buy into it at lower prices.
The UK-India deal may not change the fundamentals of the Indian economy, or the outlook for the trust, but it should remind investors of the importance of India on the world stage. That’s why global leaders are bringing their A-team to India – they recognise its vast potential.
Important information
Risk factors you should consider prior to investing:
- The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
- Past performance is not a guide to future results.
- Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
- The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
- The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
- The Company may charge expenses to capital which may erode the capital value of the investment.
- Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
- There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
- As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
- The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.
- Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends, and certain investors may be subject to further tax on dividends.
Other important information:
The details contained here are for information purposes only and should not be considered as an offer, investment recommendation, or solicitation to deal in any investments or funds and does not constitute investment research, investment recommendation or investment advice in any jurisdiction. Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use with Aberdeen. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Aberdeen, or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates.
The abrdn New India Investment Trust plc Key Information Document can be obtained here.
Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. The company is authorised and regulated by the Financial Conduct Authority in the UK.
Find out more at aberdeeninvestments.com/anii or by registering for updates. You can also follow us on X, Facebook and LinkedIn.
