Thursday, 24 November 2011

India and the UK

India and the UK have a long established partnership that manifests in many ways; the links between our 2 countries are strong and healthy and there is much room to grow.

In 2010, bilateral trade between the UK and India grew by 20%, bringing the total to £13 billion. UK goods exports to India grew by 37% and goods imports from India rose by 27%. However, despite an overall growth in exports from the UK, the country’s comparative position has been slipping. In 2005 the UK was the 5th largest exporter to India, whereas the UK is now the 18th largest exporter. India is the 13th largest export market for the UK, while the UK is India’s 5th largest export market, accounting for 3.6% of all India’s exports. There is a general view that the relationship is under –utilised.

The potential for growth in trade and investment between the UK and India is huge as reflected by Indian Prime Minister Manmohan Singh when declaring last year that the 2 countries ‘should aim at the doubling of our bilateral trade turnover in the next five years’. However as the British Prime Minister David Cameron summed it up while in India ‘we cannot rely on sentiment and our shared history’ to make this happen.

1) Firstly, UK companies operating in India

2) Secondly, Indian Companies that use the UK as a base to raise capital and to operate abroad

3) Thirdly, related to the Second point, but Indian companies that operate in Britain, but are fully engaged with the UK’s economy.

Britain in India
British Business has a strong presence in India and has for many years. Many of the UK’s big names are present, Arup, Mott Macdonald, Serco, Amec, JCB and Unilever.

The success of the expanding Indian economy is widely acknowledged by UK investors. The most recent being the set up of ‘India Gas Solutions’ by BP and Reliance Industries in a $7.2billion investment focused on global sourcing and marketing of natural gas in India. This is one of the largest ever foreign investments into India and clearly demonstrates the continuing importance of each country to the other.

As access to India’s services sector grows, I have absolutely no doubt that the UK will jump up the league table of bilateral trade and investment flows almost overnight. The India-EU trade pact that is reportedly to be completed in the New Year should help with this.

India in the UK

Of all the Indian Companies operating in the European Union there are more in the UK than the other 26 EU nations combined. The London Stock exchange is host to 31 listed companies, 20 more than New York, and many more than Singapore and Hong Kong. Most of the Indian companies operating here do so to take advantage of the City of London as a financial Hub, as an access point to Europe and as a Geographical bridge between the East and the West. I hope this will remain the case in the future.

Essar Energy is a good example of a fast growing company that used London in this way; they raised US$2 billion through an initial public offering in May 2010.

I believe that if we want such partnerships between India and the UK to grow and strengthen, then the City of London’s pre-eminence must be protected. With regards to the proposed ‘Tobin Tax’, the UK’s strong stance against it is sensible. If the British Government gives an inch by way of the financial services tax they will lose a mile in international business.

The Second Category of Indian Company operating in the UK are the fully engaged ones – like TATA.

Tata is now the UK’s biggest manufacturer, with almost 40,000 workers. When including Tata's service industries, such as consultancy, the Company is the largest private sector employer in the UK.

This is a Model that can be especially fruitful for both countries. Key to ensuring this is converting the Indian Companies that are in London to take advantage of the City into fully integrated Companies along the Tata Model.

There is also great scope for synergy with high end engineering design and mass marketing. It is what James Dyson did in China, but the only problem is that Dyson products are now made in China without any involvement from Dyson due to weak IP regulation. This would not happen in India.

Tata has demonstrated how profitable working with a pre-existing British firm can be by buying into existing brands. Let the British design and the Indians scale up.

In reality, India and the UK have an existing partnership that will continue to grow slowly on its own, but if we want to turn it into a true 21st Century Partnership it requires a catalytic intervention from Governments and the private sector. The ‘sea change’ that both Governments called for during David Cameron’s visit to India last year will not happen unless the relationship is managed and developed actively. I would like to see more direct involvement from top Indian and British business leaders.