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Trade (India)

4 pm

Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): I am very grateful to have secured this short debate on United Kingdom trade with India. There are many different issues on which one could focus under such a broad title, but I shall use the short time available to me to focus on one question; what further steps should we take to boost UK exports to India?

I contend, as the Minister will have gathered from the strong hint in my contribution in Trade and Industry questions last Thursday, that although UK exports to India have increased, we are not capturing a large enough share of the enormous growth in India's international trade. There are no narrow partisan points to be scored, and the purpose of the debate is in no way to talk down the progress that has already been achieved or to criticise the efforts of Ministers and their officials at UK Trade and Investment to boost our exports further.

Peter Luff (Mid-Worcestershire) (Con): I am grateful to my hon. Friend for giving way so early in his remarks in this very important debate. There is concern about the shift in UKTI's focus away from export promotion towards inward investment, which is one of the issues that the Select Committee on Trade and Industry considered in its inquiry into trade and investment relations with India. I hope that my hon. Friend will encourage businesses and other organisations to contribute to that inquiry.

Mr. Crabb : My hon. Friend makes an excellent point. I was aware of that concern, and I look forward to seeing the outcome of the Select Committee inquiry.

This afternoon, I want to ask what I hope will prove to be useful and helpful questions and observations about our need to make even more progress in developing the Indo-British trade relationship. At the beginning of September, I had the pleasure of visiting India with the Conservative party's shadow Foreign Secretary and two other new Members of the House. It was not my first visit to the country, but I returned from that trip with a huge sense of optimism and excitement about what is happening in India right now. Driving around New Delhi, we saw the signs of serious economic activity all around us; new roads, new bridges and major pieces of infrastructure being built.

We visited Ranbaxy's new state-of-the art research and development facility at Gurgaon and the new Fortis hospital at Noida. We met the Confederation of Indian Industry and the National Association of Software and Service Companies, as well as various Ministers. Everywhere we went, the message communicated to us was one of huge enthusiasm for a growing trading relationship with the UK, and a desire for UK companies properly to understand the exciting prospects of doing business in India.

David T.C. Davies (Monmouth) (Con): Will my hon. Friend join me in welcoming the fact that many companies are outsourcing jobs to India and that call centres are being set up there, because that is a means of raising standards of living in the third world and something of which we should not be afraid?

Mr. Crabb : My hon. Friend makes a very good point. We should not be afraid of it at all, and companies
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should certainly consider outsourcing to India if that delivers value to shareholders. It will also have the benefit of helping to raise living standards there.

I shall not waste time bombarding the Minister with facts and figures about India's excellent growth in gross domestic product. He knows all about that and probably has even better statistics at his fingertips than I can assemble. The central point is that the growth in India's imports is enormous. Imports are up by a third this year to $63 billion. Even after stripping out the effect of oil, imports into India are currently growing at a rate of 30 per cent. Are UK firms capturing enough of that growth? I believe that they are not.

Stephen Hammond (Wimbledon) (Con): My hon. Friend is right that UK firms may not be doing enough to capture growth, but he will remember that when we had the chance to speak to Mr. Nath, the Commerce Minister, on the trip that he describes, we spoke about the liberalisation of both financial markets, and particularly about the need to liberalise the insurance market. I hope that the Minister will take the message that we need to continue to press for that opportunity and to ensure that the Indian Government open up the insurance market further.

Mr. Crabb : I am grateful that my hon. Friend made that point, because I was not going to cover it. We need to consider some of the barriers that need to be taken down on our side when we think about how we expand trade into India.

Our exports to India in the 10 years between 1995 and 2004 were on average less than 5 per cent. a year. One could pick a different year as a baseline and come up with a slightly better or slightly worse figure, but the simple fact is that since India's programme of liberalisation started, our export growth to India has hardly been spectacular. Between 2003 and 2004, it was flat, with an increase in service exports that did not quite cancel out a fall in our goods exports. Our exports to China, the United States and Russia have grown at a much greater rate over the same 10-year period. In fact, our export growth rate in India has been similar to our export rate in the European Union, which is considered to be a sluggish market.

Daniel Kawczynski (Shrewsbury and Atcham) (Con):I joined my hon. Friend on that visit to India and I am pleased to support him in this debate. However, having visited India on many occasions with my previous company, Intellicommunications, I welcome the Government help for new-to-export firms going there. It is just a shame that some of the funding to existing firms has been cut recently.

Mr. Crabb : I understand that as a result of the comprehensive spending review last year, some of the funding for export promotion at UK Trade and Investment was cut. The British Chambers of Commerce has also expressed concern.

Another concern was expressed by David Frost, the director general of the British Chambers of Commerce, in an interview with one of the Minister's departmental publications:

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He was talking about India, China and the US. The British Chambers of Commerce has been making that point for years and has been trying to draw attention to the huge opportunities in India and the need to move quickly to seize them.

In discussions with UK exporters and individuals connected to UK trade initiatives since returning from India in September, I have come across the concern that exciting action is taking place elsewhere in which we are not sharing fully. I heard that view expressed again at the launch of the Indo-British Partnership Network at Asia house on Monday evening. Could we be doing better? I believe that we could and should be doing a whole lot better.

On Monday evening, the Indian high commissioner said that Britain is a natural partner for India. He mentioned the 250 years of shared history, albeit not a voluntary relationship on the Indian side. There are a number of other factors that mean we should be well placed to take advantage of opportunities in India.

First, we are home to one of the largest components of the Indian diaspora. There are now more than 1.5 million people of Indian extraction here in the United Kingdom, many of whom have built successful enterprises here, not to mention the thousands of Indian students who are achieving impressive results at our top universities and business schools.Secondly, we have a shared language. There are up to 200 million English speakers in India, making it the world's second largest English-speaking nation. Thirdly, India shares values and a political system modelled on our own. The Minister made a very pertinent point on Monday evening. None of those factors necessarily translates into easy and automatic wins for UK exporters, but they provide a solid base from which we can build an advantage.

I am concerned that other countries seem to have woken up far quicker to the huge opportunities in India and are notching up truly impressive increases in their exports there. Australian exports to India, for example, are growing at more than 30 per cent. annually and last year passed 6 billion Australian dollars. If that is converted to sterling, it is not too far behind UK exports; on current trends it may not be very long before Australia overtakes Britain in terms of the value of her exports there.

What has impressed me about the Australian approach is how they identify certain niche areas on which they focus concertedly. The 2010 Commonwealth games in Delhi is an obvious example. Australian firms, with the support of their Government, are seeking to leverage their expertise in providing services and infrastructure for major sporting events, and they have specifically targeted the 2010 Games as a major business opportunity.

Stephen Pound (Ealing, North) (Lab): I am grateful to the hon. Gentleman for giving way and for giving the House the opportunity to discuss this important issue involving the nation that is, after all, the eighth biggest inward investor in the UK.

On the point that the hon. Gentleman made concerning Australian preference, does he see any causal linkage between the fact that Australia is now the
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third most popular country where Indian students study abroad, and the economic success of Australian trade in India?

Mr. Crabb : The hon. Gentleman makes a good point. I am aware of the huge increase in tourism between the two countries; Indians visiting Australia and Australians travelling to India and elsewhere around the world. On the back of the Sydney Olympic games in 2000 and the Melbourne Commonwealth games next year, Australian companies have already been successful in picking up contracts in Delhi. That is partly the result of initiatives such as the games linkages programme, which was set up by the state of Victoria to help its firms to exploit opportunities at other major sporting events.

Peter Luff : I agree with what my hon. Friend said about the Commonwealth games, but I want to pick up the point made by, for this purpose if not for every purpose, my hon. Friend the Member for Ealing, North (Stephen Pound). My advice is that he should not let the Minister get away too easily with the point about higher education because there is real concern in India that our regime, particularly on visas and the working arrangements attached to those visas, is making the UK less attractive than it should be for Indian students. We need to make progress on that. Australia and the United States of America are overtaking us as attractive locations for students because of the visa working requirements. That is important for long-term trade relations with India.

Mr. Crabb : That is certainly an important contribution. Another example of a country achieving impressive export growth to India is Israel. Bilateral trade between India and Israel has grown by nearly 25 per cent. a year, a level broadly in line with India's overall increase in international trade. Trade with Israel has grown from around $200 million in 1992—a tiny amount—and is projected to reach $2.7 billion this year. The two countries are cementing what seems to be an exciting trading relationship backed up with a clear target set by Kamal Nath, the Commerce Minister, who wants bilateral trade to exceed $5 billion by 2007. India has become Israel's second largest trading partner in Asia in non-military goods and services.

Like India's trade with Belgium, diamonds account for a large proportion of the trade but India and Israel are pursuing interesting and exciting initiatives in telecommunications, biotechnology, nanotechnology and space science, which are areas where there are potentially huge high-value gains in future. Perhaps the Minister will tell us whether his Department is working towards clear targets for increasing Indo-British trade and, if so, what they are.

The United States is India's largest trading partner. Between 2003 and 2004—the year when our exports to India actually fell—US exports increased by 22 per cent. Again, that increase was commensurate with the overall growth in India's international trade.

In conclusion, India's economic growth is one of the central narratives of what is happening in the global economy today. I am concerned because British firms should be at the very forefront in sharing that growth, but they are not. A country such as the United
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Kingdom, which has the fourth largest GDP and two centuries of trading experience with India, should have bilateral trade with India in 2005 of more than £6.5 billion or £7 billion with the second fastest-growing and 10th largest economy in the world. I look forward to hearing the Minister's thoughts and his response on how we can boost our exports to India.

4.12 pm

The Minister for Trade (Ian Pearson) : It is a pleasure to serve under your chairmanship, Mr. Gale, and I start by congratulating the hon. Member for Preseli Pembrokeshire (Mr. Crabb) on securing the debate. I agree with him about the importance of trade between the UK and India, and acknowledge the close interest that many hon. Members on both sides of the House have in developing and strengthening trade relations with India.

India is the world's second fastest-growing economy and is forecast to become by 2050 the world's third largest economy after the United States and China. It will also become the world's most populous nation. Since economic reform started in 1991, growth rates in India have averaged between 6 and 7 per cent. annually, and growth is now forecast to be about 8 per cent.

The emergence of India as an economic superpower is not in doubt: whether in traditional sectors such as construction, manufacturing and financial services or in emerging areas such as the creative industries, renewable energy and environmental technology, opportunities exist for UK businesses. I assure the hon. Gentleman that the Government want to ensure that UK companies are well placed to take advantage of India's emergence as an economic superpower, and we are doing that by committing an increased percentage of UK Trade and Investment resources to India.

India is recognised as a priority market in all 16 industry sectors identified by UKTI as being key to the success of the global economy. UKTI has in India the second largest network globally after that of the United States. There are nine trade offices located in the key commercial centres—New Delhi, Mumbai, Chennai, Kolcotta, Puna, Ahmedabad, Bangalore, Hyderabad and Chandagar—and 72 staff carrying out commercial work for UKTI in India. Put simply, the Government are putting their money where their mouth is when it comes to promoting trade with India.

Support for encouraging trade between our two countries is evident at the highest level. In September, along with my right hon. Friends the Prime Minister and the Secretary of State for Trade and Industry, I visited India for the EU-India and UK-India summits, accompanied by the largest trade delegation seen for a long time. Increased trade was at the top of the agenda during the visit, and we discussed at length more ways of removing some barriers to trade that still exist between the UK and India.

In the insurance and financial services sector, India has a strong desire to increase trade between our two countries, and we are making good progress on joint UK-India initiatives. We are also working towards the challenging objectives set by the Joint Economic Trade Committee. JETCO was set up as part of the UK-India joint declaration made in London by the Prime Ministers of the UK and India on 20 September last
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year. It is a bilateral trade and investment forum that seeks to maximise the potential for trade and investment in the relationship between our two countries.

Peter Luff : I do not blame the Government for this, and I agree with what the Minister is saying, but does he share my concern that in debate on trade and investment relations between India and this country, India is often considered a threat in some sense, rather than the provider of a huge opportunity for this country.

May I invite the Minister to expand at length on what he said about environmental and renewable energy technologies? As India expands its economy—with the huge challenges to the global environment involved with its use of coal, for example—British companies are well   placed to assist with environmentally friendly development.

Ian Pearson : The balance of economic power is shifting to the east—to China, India and Asia more generally—so it is vital that we recognise not only the challenges brought by the growing economies of India and China, but the opportunities. We should not adopt a negative approach to those countries. That is why the Government have been looking to maximise the opportunities for dialogue, and to encourage more and more of our companies to enter those important markets for the future. The hon. Gentleman is right that there are tremendous opportunities for environmental technology as well as for water and other services.

I was about to refer to air services, which is another area in which there has been tremendous progress in the past year. The number of direct flights has tripled, from 16 a week to more than 50. Our objective is an open skies agreement between the UK and India.

In another area, the creative industries, my right hon. Friend the Secretary of State for Culture, Media and Sport signed a film co-production treaty on Monday. That framework will allow UK and Indian film production companies to collaborate on future projects. It is due to come into force around next April.

The Asia Task Force, which is co-chaired by my right hon. Friend the Secretary of State for Trade and Industry and Bryan Sanderson, chief executive of Standard Chartered bank, is also up and running. The ATF, which has more than 20 chief executive officers of major UK companies as well as Lord Desai on its board, has already commissioned research on identifying how we can improve the trading environment throughout Asia. A major strand of that research will focus on trade with India.

As the debate has shown, it is not just the Government who should encourage greater bilateral trade with India, as the private sector has an important role to play, too. The extent to which the private sector is beginning to focus on India is encouraging. As I said, during the Prime Minister's visit to Delhi, we were accompanied by a delegation of more than 30 CEOs of British companies, including small and medium-sized enterprises as well as multinationals. They were all keen to increase trade between the UK and India.

The Indo-British Partnership Network, which I formally launched on Monday, as the hon. Member for Preseli Pembrokeshire mentioned, will, I am sure, play an important role in helping to encourage UK
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companies—particularly small and medium-sized businesses—to export their goods and services to India. I hope, too, that it will play a key part in identifying issues that prevent companies from taking advantage of trading with India.

Much has been done, but I accept that more needs to be done. The value of our trade with India accounts for a little less than 1 per cent. of our global total. It can and should be more. Perhaps we should forget predictions. Today, India is the world's 10th largest economy, but it is 17th in the league table of UK export markets. That reinforces my strongly held view that more can be done to increase trade between our two countries. Therefore, I welcome today's debate and the Trade and Industry Committee inquiry on trade and investment opportunities with India. I am glad to see the hon. Member for Mid-Worcestershire (Peter Luff), the Chair of the Committee, in the Chamber today, and I hope the inquiry makes policy recommendations that will help us progress to increased trade between the UK and India.

UKTI officials are seeking views on how to improve trade from key stakeholders such as the CBI and the Indo-British Partnership Network. The British high commission in New Delhi is busy strengthening its engagement with the Government of India on business issues. The more we can identify and overcome barriers to trade between the UK and India, the better placed our companies will be to take advantage of the opportunities that come with India's growth and development.

Stephen Hammond : A point about barriers that was made to our small team, which visited the Science Minister—a rather smaller team than that which went out with the Minister a week later—was that UK universities, and particularly chemistry research departments and some new high-technology industries, are at times reluctant to undertake joint developments with Indian universities. The trade potential of those developments is enormous. Will the Minister consider inviting universities to forge greater links with Indian universities?

Ian Pearson : We are keen on greater links between UK academic institutions and Indian universities, although I do not want to decry the good work that has already been done in that respect. For the UK's future, it is vital that our world-class science base and world-class research should network with universities and the scientific community in growing economies. We have, through the Foreign and Commonwealth Office, scientific counsellors in our posts across the world, working on developing such partnerships. I strongly believe that that is to the long-term advantage of UK plc.

While I am on that point, I want to reassure hon. Members that we are looking into the question of student visas and work permits for India, China and other growing economies. We recognise that there is an issue to be dealt with, and our programme includes closely scrutinising it to find out what else we can do to ensure that the UK is competitive in the area in question.
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Stephen Pound : As we are talking about science delegations, I should perhaps mention that I was a member of the smallest delegation ever to visit India. It consisted of the hon. Member for Mid-Worcestershire (Peter Luff) and me.

On the Minister's point about work permits and visas, is he aware that while it appears to be no problem for UK nationals to get permits to work in India, there are still severe concerns, which I have heard expressed to him in my presence, about the reverse process? Is he prepared to make a commitment today to do all he can within the Government to speed up the process of achieving equality in the area of work permits?

Ian Pearson : I can certainly assure my hon. Friend that we are actively addressing that issue. We recognise that it is important, but there are sensitivities involved and the work involves a number of Departments. However, it is firmly on our agenda, as is work to persuade more companies seriously to consider doing business with India.

Let me share with hon. Members some things that UKTI is doing to address the issue. It is organising a series of workshops and seminars on doing business in India. Those events are taking place across the UK, and they are designed specifically to inform companies of the many opportunities that exist and to provide some practical guidance on avoiding pitfalls. The key objective of the events is to encourage companies to think hard about exporting to India. If UKTI's provisional estimates are correct, more than 1,000 companies will attend those workshops. Therefore, in addition to the work being done through the Indo-British Partnership Network, a vital awareness-raising programme is taking place.

We also need to discourage the still widely held view that trade between the UK and India means little more than outsourcing low-skilled manufacturing jobs and call centres to India. It does not. Let us not forget that the UK benefits greatly from Indian investment. Companies such as Infosys and Tata make a terrific contribution to the UK economy, and India is investing in the UK in the high-tech sectors—60 per cent. of Indian investment is in IT.

Trade between the UK and India is increasing. Half-yearly figures for 2005 show an increase of more than 24 per cent. on the corresponding period in 2004—£3.7 billion for 2005 compared with £2.9 billion for 2004—with trade roughly in balance. I very much welcome the fact that progress is being made. Again, I believe that we can do even better, and we should be aiming to do so. I expect that the number of UKTI-supported trade missions in India will grow next year and the year after, and I can tell the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) that not only new-to-export companies, but companies that are new to the Indian market, will be eligible for UKTI support

Mr. Crabb rose—

Ian Pearson : If the hon. Gentleman will allow me, I shall continue as there are only a few minutes left. In that time, I want to re-emphasise the importance that the Government attach to doing more business with India.
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I shall visit India again next month to attend the Confederation of Indian Industry business summit and the Auto Expo trade fair, and I hope to take with me a delegation of more than 20 business people who are keen and actively engaged in doing business with India. India means business and we need to be serious about doing business with India. It is a market that offers huge potential, and I am keen to develop further and faster our trade relationship with India.

I welcome the interest shown by the hon. Member for Preseli Pembrokeshire, who raised this important issue, and I hope we have a great many more debates on how we can further improve trade with India. I am sure we will do that as part of the Trade and Industry Committee inquiry.

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