Select Committee on Business and Enterprise Fifth Report


1  Introduction

1. In June 2006 our predecessor committee, the Trade and Industry Committee, published Trade and Investment Opportunities with India.[1] The Report noted the growing importance and influence of India in the world economy, and came to three main conclusions, on which its detailed recommendations were based:

  • despite the UK's shared history and commercial ties with India, the UK was not as engaged with India's markets as it could be, while the UK public's perception of India had been seriously distorted by the media focus on the perceived threat to employment from outsourcing of jobs, particularly from call­centres;[2]
  • businesses in the UK did not always appreciate or take full advantage of the rate at which the Indian market was liberalising (although uniform and continuous progress could not be assumed);
  • UK institutional arrangements for trade and investment support within India were enthusiastic but confusing—there were too many overlapping bodies with ill-defined responsibilities—and these efforts required greater focus.[3]

2. In April 2007, the Trade and Industry Committee announced the current inquiry as a 'one year on' follow­up to examine progress since the Report. It has been continued by this, its successor committee. We received written evidence from a range of organisations, and also took oral evidence from the UK-India Business Council, UK Trade and Investment officials, and the Trade and Investment Minister, Lord Jones of Birmingham, and the Trade and Consumer Affairs Minister, Gareth Thomas MP, in the Department for Business, Enterprise & Regulatory Reform (BERR).[4] We are grateful to all those who gave evidence to this inquiry. This evidence is annexed to this report which puts on record our support for some major positive developments since 2006, and highlights those issues which still need to be addressed.

Response to the previous Report, and developments since

3. The evidence we have received suggests that perceptions of India among UK businesses have improved considerably since 2006, but that further progress still needs to be made. The UK India Business Council (UKIBC) told us that there had been "an escalation in the awareness and interest in India",[5] and that "British business has definitely woken up to India […] there is real momentum building".[6] However, although the UKIBC's Chairman, Lord Bilimoria, considered there was a special relationship between UK and India, he warned that the "potential is far greater than what we are actually achieving at the moment".[7]

4. Certainly, investments both from the UK to India and from India to the UK have increased, and there have been many recent high-value deals. These include the takeover of India's fourth largest mobile operator, Hutchison Essar, by Vodafone of the UK, which at around £5.5 billion[8] was "the largest foreign investment in India's history".[9] In the other direction, there were takeovers of Whyte & Mackay by United Breweries Group, and of Corus by Tata, while Ford confirmed the sale of Jaguar and Land Rover to Tata Group on 26 March 2008.[10] UK Trade & Investment considered that "UK investment is high - reflecting the fact that many companies are using non-export models to pursue their business with India", such as business process outsourcing (or offshoring), while UKTI stated that investments in the other direction "should bring India into the big league of investors in terms of value in 2007."[11]

5. The Trade and Consumer Affairs Minister, Gareth Thomas, said one effect of such investment deals "has been to increase the sense of urgency […] about British businesses' desire to get into the India market much more fully than they have been able to do."[12] British Expertise said the Tata-Corus deal had "crucially improved foreign perceptions of India to new levels".[13] The CBI also saw the deals as "positive developments", "cause for encouragement but not complacency."[14] UKIBC said it was "confident that recent high­profile deals are merely a precursor to a flood of similar activity in years to come".[15] These investments in the UK by Indian businesses not only have a significant economic impact in their own right, but have also led to an increased awareness of the significance of the changes taking place in India itself.

6. UKTI told us that the previous Report had "made some valuable recommendations that added weight to UKTI's decision to focus a greater proportion of resources on emerging markets, to give greater priority to our bilateral trade policy work in these markets and use our overseas network more strategically to achieve our objectives in India."[16] Trade and Investment Minister, Lord Jones, said of the Report that UKTI "took it to heart and they worked with it as a basis for change".[17] (The Committee also examined the new UKTI strategy, Prosperity in a Changing World, intended to shift focus towards key emerging markets, in detail as part of its wider inquiry into the future of UK manufacturing.[18])

7. The Trade and Industry Committee recommended that the Indo British Partnership Network (IBPN) become "the de facto Indo-British Chamber of Commerce and so the natural voice of commerce in relation to Indian trade and investment issues."[19] The IBPN has now been transformed into the UK India Business Council (UKIBC).[20] Its annual Government funding has been increased over thirteen-fold, from £75,000 to £1 million, an increase which we welcome unreservedly. (This and other trade support changes are discussed in more detail below).

8. In addition, since the Report was published there has been a high level of ministerial engagement. There were 11 visits from ministers, devolved administration representatives, the Lord Mayor of London and the Mayor of London between October 2006 and June 2007 alone.[21] This engagement has been used to increase business links. A delegation of 150 business people accompanied the then Chancellor, Gordon Brown, on a visit to India in January 2007.[22] This was the largest ever delegation from the UK to visit India.[23] During this visit Gordon Brown outlined his aim "to double exports to India by 2010 and quadruple exports by 2020".[24] The newly appointed Trade and Investment Minister, Lord Jones of Birmingham, made India the destination for his first long-haul visit in September 2007.[25] Gordon Brown then visited India as Prime Minister from 20­21 January 2008,[26] accompanied by Lord Jones, the Secretary of State for BERR, John Hutton, and a delegation of around 100 business people.[27]

9. After the warnings in the Trade and Industry Committee's 2006 Report that the UK risked falling behind its competitors in India, we are pleased to see that UK plc appears to have 'woken up' to India. The Trade and Industry Committee's Report contributed both to a change in attitudes in the UK towards India, and increased UK engagement with India.

10. In particular, we are delighted that the Report has contributed significantly to a shift in the Government's approach to trade with India. This includes sustained high-level involvement through UK ministerial visits to India, and visits from Indian ministers to the UK, and a substantial increase in funding for bilateral trade initiatives. We hope the visit to India by the Prime Minister and Lord Jones in January 2008 will lead to a further enhancement of bilateral links. We are pleased that the Government seems to be taking the opportunity to deal with the trade and investment issues that these visits offer.

11. The first ever UK-India Investment Summit was held in London in October 2006, and addressed by the Prime Ministers of both countries, Rt Hon Tony Blair and Dr Manmohan Singh. A second investment summit had been planned alongside the prime ministerial visit originally scheduled for November 2007. However, no summit was held when the visit was delayed until January 2008, perhaps because the Prime Minister's visit lasted only one-and-a-half days, including a Sunday. While UKTI told us that the visit programme offered senior UK business people opportunities to discuss bilateral trade and investment matters with the Indian Prime Minister,[28] UKIBC said it was "disappointing that the Investment Summit did not happen as planned" although it also saw "a great deal of opportunity for engagement, and UKIBC seeks to actively encourage and support future dialogue."[29] We note that the first bilateral UK-India Investment Summit held in 2006 has not, yet, been repeated. We encourage the Government to hold a follow-up summit and hope it will do so at an early date.


1   Trade and Industry Committee, Trade and Investment Opportunities with India, Third Report of Session 2005-06(HC 881-I, 2005-06) hereafter referred to as HC (2005-06) 881; http://www.publications.parliament.uk/pa/cm200506/cmselect/cmtrdind/881/881i.pdf, and Government Response (Fifteenth Special Report of 2005-06, hereafter referred to as HC (2005-06) 1671) http://www.publications.parliament.uk/pa/cm200506/cmselect/cmtrdind/1671/1671.pdf  Back

2   HC (2005-06) 881, para 74 Back

3   ibid. Back

4   Lord Jones is a joint minister between the Department & Business, Enterprise & Regularly Reform (BERR) and the Foreign & Commonwealth Office, while Gareth Thomas is a joint minister between BERR and the Department for International Development. Back

5   Q63 Back

6   Ev 61 (UKIBC) p2 Back

7   Q65 Back

8   Ev 72 (UKTI), para 2.3.6 and Ev 86 (UKTI) para 9 Back

9   "Vodafone gets Hutch Essar bid clearance", Financial Times, 7 May 2007, p22 Back

10   "Land Rover and Jaguar become firm's latest British brands", The Guardian, 27 March 2008 Back

11   Ev 71 (UKTI), para 2.1.2 Back

12   Q117 Back

13   Ev 39 (British Expertise), para 4 Back

14   Ev 49 (CBI), para 2 Back

15   Ev 63 (UKIBC), p4 Back

16   Ev 71 (UKTI), p2 Back

17   Q109 Back

18   Trade and Industry Committee's Sixth Report of Session 2006-07, Marketing UK plc - UKTI's five-year strategy (Sixth Report of 2006-07) HC 557, June 2007; http://www.publications.parliament.uk/pa/cm200607/cmselect/cmtrdind/981/981.pdf (and Government response (Fifth Special Report of 2006-07) HC 981, July 2007; http://www.publications.parliament.uk/pa/cm200607/cmselect/cmtrdind/981/981.pdf)  Back

19   HC (2005-06) 881, para 107 Back

20   Q62 Back

21   Ev 74 (UKTI), para 3.2.5; The second half of 2007 also saw visits from the Environment Minister, Foreign Office Minister responsible for South Asia, the Government's Chief Scientific Adviser, the Deputy First Minister of the Welsh Assembly Government, and the Mayor of London (from British High Commission in India, Visits page; http://www.britishhighcommission.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1168628069339) Back

22   Ev 74 (UKTI), para 3.2.5 Back

23   Ev 74 (UKTI), para 3.2.5.In 2006 the delegation numbered 30 (Q63) Back

24   Speech by the Rt. Hon. Gordon Brown MP, Chancellor of the Exchequer, at the Confederation of Indian Industry, Bangalore, 17 January 2007; http://www.hm-treasury.gov.uk/newsroom_and_speeches/press/2007/press_06_07.cfm Back

25   A report of the visit can be found at Ev 85 Back

26   "Visit of British Prime Minister the Rt Hon Gordon Brown MP", Foreign Office press release, 18 Jan 2008; http://www.britishhighcommission.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1059738704019&a=KArticle&aid=1199202779634  Back

27   Q158 Back

28   Ev 85 (UKTI) para 1 Back

29   Ev 69 (UKIBC) Back


 
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