Memorandum submitted by British Expertise
INTRODUCTION
1. We would like to offer evidence for the
follow-up inquiry into Trade and Investment Opportunities with
India. British Expertise is the leading British trade organisation
promoting British services internationally. Our 250 member companies
work in all the main consultancy and construction sectors, including
urban regeneration, physical infrastructure development, project
management, capacity building and legal services. We organise
15 to 20 overseas trade missions per year, and have taken two
trade missions to New Delhi in the past year.
EVIDENCE
2. India remains one of the most attractive
markets in the world for our members and for British companies
generally. Indian economic growth remains high at 8%+, and we
expect that growth to continue in the foreseeable future. Our
own response has been to seek closer ties with the Indian High
Commission in London, and with appropriate Indian business organisations,
in order to engage with leading actors in the Indian public and
private sectors.
3. We gave evidence to the committee in
2006. A year is quite a short time frame in which to judge whether
UK perceptions towards India have changed; or indeed to measure
the effect of changes made by UK Trade & Investment to strengthen
its network in India. However a certain amount can be said. In
our last submission we praised the quality of UKTI staff in India,
and questioned why UKTI offices in India had been subjected to
staff cuts. We are now pleased to note that extra UK based staff
have been posted to New Delhi and Mumbai. We hope that these resources
will be focussed on helping UK companies both in the UK and in
India, and not be diverted to the organisation of the many VIP
visits that are taking place.
4. In the past year we have seen much change
in India, especially in confidence levels at home and overseas.
This has been reflected in the number of Ministerial visits from
India to the UK. It has also been reflected in business activity,
for example Tata Steel taking over Corus. This takeover was front
page news in India, and visibly lifted confidence levels in an
already booming stock market. Many Indians felt that this move
crucially improved foreign perceptions of India to new levels.
5. It is clear to those who visit India
on a regular basis that the major obstacle holding India back
from competing with China is the lack of good infrastructure,
especially roads and airports. India now has a surfeit of new,
high quality airlines, as well as new low cost carriers. The resulting
competition means that air fares in India are now at historical
lows, opening up the market to a new set of consumers. The downside
of this is that airports and airport infrastructure (such as air
traffic control systems) are now overstretched and overcrowded.
The two major gateway airports in Delhi and Mumbai were recently
successfully privatised. We believe that Kolkata (Calcutta) and
Chennai (Madras) airports will be privatised at some point in
the future. British companies have in the past been highly successful
in the airport and other infrastructure sectors. It is important
that UK companies are given every chance to take advantage of
the new opportunities becoming available in this sector, and supported
in their involvement.
6. Consumer confidence in India is high.
There is growing evidence that Indian consumers and the ever expanding
middle class have increased their spending power, and become more
brand conscious and less price conscious. The way that Indian
consumers now shop is also changing, with a shift in emphasis
from local corner shops to modern shopping centres and malls.
The retail sector will be the next sector to be fully opened up
to international investment. We understand that foreign companies
will soon be able to own 100% of a large retail outlet (100% Foreign
Direct Investment)—at present they are limited to 50%. This
will bring opportunities not only for our large retailers but
also for architects, designers and consultants. It is important
that UK retailers, architects and designers are well placed to
take advantage of these new opportunities.
7. Legal services remains one of the few
sectors yet to be opened to 100% Foreign Direct Investment. We
are aware that there is a strong local lobby consisting of small
local legal practices who are opposed to foreign legal firms operating
in India. We believe this opposition is misguided—foreign
legal practices will offer different skill sets from their local
counterparts. At present, UK legal firms can set up loose joint
ventures with Indian counterparts, or practice from third countries
such as the United Arab Emirates. We hope that consideration will
be given to using Ministerial gatherings such as the JETCO process
to lobby to open up this important sector to 100% FDI.
8. As we noted in our previous evidence,
one of the keys to companies being able to take advantage of the
opportunities we have highlighted is timely and accurate advice
from UK officials in India, advice that they are uniquely placed
to provide. This involves tracking and then alerting UK companies
to changes in laws and regulations, as well as alerting them to
new opportunities. The performance of UKTI staff in India is often
excellent in this regard. Much of the hard work is done by locally
engaged members of staff in The High Commission and Deputy High
Commissions. However the buoyant Indian economy has encouraged
many new international companies to set up in the major metropolitan
areas, and indeed the larger British Expertise members are among
them. Many companies, Indian and international, are competing
for a limited number of experienced and talented staff. Some foreign
Embassies, High Commissions and Consulates in India are paying
private sector rates of pay in order to attract experienced senior
locally engaged staff. The result is that wage rates in the major
metropolitan areas have increased at a much higher rate than that
of inflation, which was 6.6% in late January 2007. We hope that
consideration will be given to increasing budgets to ensure that
our missions in India can continue to compete for talented people,
and that we can also retain them for a reasonable period of time.
Failure to do so will compromise the high quality and timely advice
that companies seek.
9. Finally, we hope that increasing Ministerial
contacts will be used to lobby for changes in the regulatory framework
in India, including opening up new sectors to outside investment.
May 2007
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