Memorandum submitted by Indo British Partnership
Network (IBPN)
The purpose of the submission is to give the
Committee:
A view on where the UK stands in its commercial
objectives for India.
Input on what business feels should be done
to achieve more.
View on what is and is not working in the Government's
actions on behalf of business.
A quick overview of what the IBPN is doing/is
planning to do to meet these objectives.
The Trade and Industry Select Committee recommended
in its 2006 report " . . . that a decision [be] taken
to position the IBPN as the leading player for the private sector
in the UK; it should become the de facto Indo-British Chamber
of Commerce and so the natural voice of commerce in relation to
Indian Trade and Investment issues" (Source: Para 5 Conclusions
and Recommendations)
With this resounding endorsement the TISC report
gave increased impetus to the IBPN's mission of increasing bilateral
trade, business and investment between India and the UK. The last
year has been very significant for changing UK-India relationships
and the growth of the IBPN. While the figures show that Indian
investment into the UK is growing rapidly (India is now the second
largest investor into Britain in terms of the number of projects,
with Tata Steel's acquisition of Corus bringing India into the
big league in terms of value in 2007), the real face of the change
has been the resurgence in interest and activity between the two
countries. Not only have we seen ministerial engagement at the
highest level but also increasing sizes of business delegations
(January 2007 saw the largest ever, a 150-strong business delegation
to India led by the IBPN's Chairman, Lord Bilimoria), growing
engagement of UK educational institutions with India, the opening
of the City of London office in Mumbai and the success of the
recent Indian International Film Academy awards in Yorkshire.
OVERVIEW
The IBPN believes that the potential for further
and deeper trade relationships with India is definitely there—and
Britain, perhaps more than any other country, is in a position
to partner with what India has to offer.
India and Britain have a long and close relationship,
and this is only made stronger by our shared language and most
importantly our shared values—democracy, the rule of law,
freedom of speech and a free and vibrant press in both countries.
Britain has been supportive of India's aspirations
to play a more important role in the international arena. This
extends to areas beyond trade; the Department for International
Development actively supports the Government of India in its efforts
to achieve India's poverty reduction objectives, to the tune of
£250 million a year across four states in India.
Britain is the third largest foreign direct
investor in India in terms of value of investment, and we are
also India's fourth largest trading partner. However the world
has woken up to India and competition is fierce. We still have
a long way to go to ensure that we meet Prime Minister Brown's
aims of doubling exports to India by 2010 and quadrupling them
by 2020.
The good news is that the British business community
has started to take note of India. This however, is relatively
recent—it took Britain quite a long time to fully appreciate
the opportunities it offered. The report produced by this Select
Committee last year was in fact very timely in warning that Britain
risked missing the "last train" in India. Things in
the last year have improved a great deal in this respect. British
business has definitely woken up to India. IBPN Chairman, Lord
Bilimoria is regularly called upon to brief business visitors,
regional authorities and minsters who are visiting India. They
come back and share with us their experiences and discuss opportunities
to further business links and build new ones. Business relationships
are being built and getting stronger through ministerial visits
and regular business delegations—there is real momentum
building.
UK investment into India remains high; Vodafone's
acquisition of Hutch remains one of the largest global M&A
deals in 2007. Recent reports suggest that Vodafone plans to invest
two billion dollars in India this year to expand its business.
However, behind these headline deals UK investment in India is
not growing as rapidly as Indian investment into the UK. India
is now the second largest investor into Britain in terms of number
of projects. Tata's £6.2bn takeover of Corus and the recent
announcement from United Breweries announcing the takeover of
Whyte and Mackay should bring India into the big league of investors
in terms of value in 2007.
The perception of India is changing rapidly
in the minds of British business, although once we start to look
at SMEs the conversion from awareness to intent to action will
need much work by all stakeholders. The IBPN needs to continue
to raise its profile in the regions, especially though the RDAs
and their agencies, and this will require resources, hard work,
and patience.
Increasingly we can see local and regional conferences
on India being sponsored by banks and professional services companies,
and universities are starting to host events for students and
local businesses. The numbers attending are increasing and while
the final outcomes are still not truly action-oriented, the trends
are in the right direction.
More case studies and serious analysis are needed
to highlight the case for further involvement. The headline materials
being used to promote greater interaction are now too general
to attain this next stage. This is an ideal function for a future,
expanded IBPN, and with our increased funding such a role is possible.
India: New Trends
The perception of India is that it is still
very much an IT, business process outsourcing and software destination,
while China is the manufacturing and export power. But the truth
is that India has a huge manufacturing base in its own right,
and there is going to be a movement of people away from the rural
areas, into the cities, as more industrial jobs are created.
India's workforce in the 20-60 age group is
forecast to increase by 263 million by 2050, whilst China's will
grow by 94 million. Meanwhile, in European countries such as the
UK, we will be experiencing a decline in our working age population.
During a recent presentation made by Jim O'Neil,
the head of Global Economic Research at Goldman Sachs, Tushar
Poddar (Chief Economist, India at Goldman Sachs) addressed the
issue of the emergence of new centres of economic activity in
less well known states and cities. He argued that India's growth
potential and productivity would accelerate for various reasons,
including the Golden Quadrilateral (the linking by road of Delhi,
Kolkatta, Chennai and Mumbai) putting less well-known states and
cities on the business map. This will create new centres of economic
activity and open up new regions for outside investment and trade.
TRADE AND
LIBERALISATION
We recommend that the UK Government continue
to press India for reductions in all high duty levels while offering
its full assistance in arguing within the EU for a position in
the world trade talks, which offers the liberalisation of EU and
US markets that India has a right to expect, especially with regards
to agricultural products. (Paragraph 41)
The Select Committee is right to call attention
to the farming sector; in the words of India's Finance Minister,
Mr Chidambaram, if there is one thing that can derail India's
progress, it is agriculture.
Although two-thirds of the population is dependent
on agriculture, it generates only 20% of India's GDP. To make
matters worse, the agricultural growth rate has actually been
declining over the last two decades to just over 2%—half
of what it was in the 1980s. The booming manufacturing, services
and IT sectors have created a huge and growing middle class, but
over 600 million people are still living in rural areas.
At the moment the WTO Doha development round
talks are stalled. The West can be accused of preaching free trade
and practicing protectionism: while a shocking 300 million people
in India still live on less than $1 a day Europe subsidises every
cow to the tune of $2 a day. That is a reality that we simply
cannot ignore.
Even for those familiar with India, the sight
and reality of the abject poverty hits hard. However, the Indian
government is committed to the principle that economic liberalisation
should lead to economic empowerment, especially for the most marginalised.
Recently, while addressing the Annual General Meeting of the Confederation
of Indian Industry, Dr. Manmohan Singh presented Indian business
with a "Ten Point Social Charter", a proposal to make
India's growth more inclusive.
The charter called for industry to show a healthy
respect for its workers; to make corporate social responsibility
a corporate philosophy; to be proactive in affirmative action
in providing jobs to the weaker sections of society; to resist
excessive pay packages for top management; to invest in training
people, not engage in forming cartels; to promote enterprise and
innovation; to invest in environmental friendly technologies;
to fight corruption and to promote socially responsible media.
Dr. Singh spoke about the government partnering
with industry in creating wealth and prosperity, invoking Mahatma
Gandhi's concept of "trusteeship," and industry having
a responsibility to its employees and to the community. He also
spoke of the difference that this public-private partnership has
made already.
In his own words: "It is not by accident
that the average rate of economic growth has been 9% in the last
three years. It is not by chance that the savings rate of the
country is 32% of GDP and the rate of investment has touched an
all-time peak of 35% of our GDP. It is not by luck that the manufacturing
sector is booming. It is not by good fortune that inward FDI is
close to twenty billion dollars now. It is not by a miracle that
India today in absolute terms is a trillion dollar economy."
India is not blameless when it comes to restrictive
trade practices, such as the barriers placed before foreign lawyers
wishing to practice in India; however, this system is set to change
in the next year according to an announcement by the law minister
(see below).
Stories of the old "licence raj" are
well-known, but it is the enormous opportunities, both in India
and for India, that characterise the country today: India is facing
its challenges, and is aligned in its hunger for growth, liberalisation
and progress. With the combination of the consumer (ever hungry
for choice), industry (which once wanted protection, but now wants
liberalisation) and government all aligned as being pro-reform,
there is no turning back.
The liberalising transition of India—for
a long time a closed society—has not been easy or swift.
India is a vast country: there are 35 different states and union
territories, 18 official languages, 7 major religions, around
750 elected parliamentarians in the centre and over 4,000 members
of state legislatures and two million elected individuals at the
grassroots. Change in such a system is not easy; the country's
swift reforms are therefore all the more remarkable.
India began the liberalisation process in 1991,
and began to open its markets to the world. Today, according to
a recent study by A. T. Kearney, India is perceived as the second
most attractive destination for foreign direct investment, eclipsing
even the United States. Meanwhile, Britain retains its top-flight
appeal and is still in the top four.
Globalisation has taken hold in India. India
politically is becoming increasingly outward-looking and engaged
on the world stage, and Indian companies are increasingly becoming
truly global companies.
Although barriers to outside investment in India
remain, there are significant examples of investment both into
and from India. The phenomenal growth that India has witnessed
over the last decade has propelled Indian companies to make their
mark globally.
But this growth has not come easily: for many
years—even after liberalisation—Indian companies were
held back by the Indian government's policies. When the process
of reform took hold, we began to see the first signs of the new
global India. We are confident that recent high-profile deals
are merely a precursor to a flood of similar activity in years
to come.
The Lord Mayor of the City of London recently
went on a successful trip to India recently accompanied by a delegation
of 41 people based around the financial services sector. The delegation
visited Delhi, Calcutta and Mumbai, meeting with cabinet ministers
including Kamal Nath, PC Gupta, Dr. Montek Singh Ahluwalia and
the Governor of the Reserve Bank as well as leading industrialists.
There were a number of positive results and good links were formed
to promote the City of London as a partnership for India. Several
important topics were discussed, including the development of
the financial services industry and how Mumbai can build a global
financial centre. During the course of this visit the City of
London office in Mumbai was formally opened.
SERVICES, SKILLS
AND MOBILITY
India's major source of competitiveness, and
its major market, is its people—ironic, as 1980s critics
often said that India's biggest problem was its population.
Today, India's population of over 1 billion is turning out to
be its greatest strength. And that populace is a young one: 52%
are below the age of 25. The median age will remain at 25 even
as late as 2025.
These statistics show India's enormous potential,
but it also speaks to a skills shortfall if those young Indians
are not educated to globally competitive standards. Britain has
the talented workforce and the institutions to boost the development
of high-skill industries in other countries, ranging from world-beating
universities and colleges to the unmatched financial services
expertise of the City.
There are, however, several barriers to gaining
and applying this knowledge for the benefit of India and her citizens.
The Select Committee noted two of those limits in its earlier
report: one from India, (which has announced reforms this year)
and one from Britain.
We believe a liberalised legal service market
would bring positive benefits to the legal systems of both countries.
However, Indian Government restrictions on domestic law firms
are stifling the ability of India's law firms to become the type
of companies, which, we believe, would be more than able to compete
against global law firms, should the market for legal services
be liberalised. Any resultant gains in the efficiency of Indian
law firms could only be beneficial to Indian commerce. We recommend
that the UK Government, through the Joint Economic and Trade Committee
(JETCO), urges the Indian Government to provide a conducive regime
to its domestic law firms. The UK Government should also press
the Indian Government to commit itself to a timetable for the
liberalisation of the legal services market. (Paragraph 85)
Foreign lawyers are unable to practice in India at
present. However, on a recent visit the Indian Law Minister, Hansraj
Bharadwaj, said that he was optimistic about the prospect of foreign
law firms being able to work in India, and said he thought this
was achievable before the end of the year.
Overseas students at Scottish higher education
institutions are allowed to gain work experience for two years
after graduation. The Government proposes that in England, they
should be allowed to work for one year after graduation. Education
policy may well be a devolved matter but immigration policy is
not. Allowing overseas students to remain to work in the UK following
a period of study constitutes the issuing of a work permit and
is therefore a matter for the Home Office, no matter how long
a period of time is involved. The Scottish system must be brought
into line with that of the rest of the UK as a matter of urgency
and we believe that two years is the minimum time that should
be given to all overseas students of a particular calibre under
any transitional scheme between studying in the UK and pursuing
a full time career here, or returning to their home country. (Paragraph
145 and 146)
This is an ongoing issue that has repeatedly
come up at events such as meetings of the Asia Task Force and
the UK-India Roundtable. This issue has also been raised in the
House of Lords in a statement by Lord Bilimoria. We note that
even two years is not enough for some professional qualifications,
which can require three years or more. There is a particular need
for qualifications in the financial services field; these should
be more readily available.
THE IBPN'S
WORK: PAST
AND FUTURE
Over the last year the IBPN has organised and
supported a number of events to promote trade and investment opportunities
with India amongst the UK business community. The events (introducing
visiting Indian Ministers, State Delegations, entrepreneurs and
a presentation by the Goldman Sachs Economic Research Group on
India's rising growth potential) have reached out to business
leaders in many industries. In June, the IBPN hosted a Global
Business Forum in Leeds in association with IIFA and FICCI (one
of two apex Indian chambers of commerce) whereby we were able
to reach out to more than 500 businesses in and around the region.
One indication of the increase in reach that
we have generated in the short time we have been in existence
is the scale of the business delegations we have taken to India
over the last two years.
In 2006 Lord Bilimoria led the first IBPN business
delegation: that year, 30 UK business representatives accompanied
the then-Minister for Trade, Ian Pearson. In January 2007, a second
IBPN business delegation accompanied then-Secretary of State Alistair
Darling and then-Chancellor Gordon Brown on their first visits
to India. This year, however, the delegation that Lord Bilimoria
led was five times larger—with 150 people it was the largest
business delegation the UK has ever sent to India.
With our close links with the Indian High Commission,
the Indian government, the Confederation of British Industry,
the British Chambers of Commerce, the Confederation of Indian
Industry, the Federation of Indian Chambers of Commerce and Industry
and individual business leaders we are able to offer British businesses
access to Indian policy makers and businesses to deepen their
understanding of the opportunities in India. Furthermore we have
managed to do all of this on a small budget of £75,000, a
team of two and an active non-executive board. Now, with the enhanced
policy and funding support we have received from the government,
we are confident that we can do even more.
In addition to the invaluable networking role
played by IBPN in order to strengthen and develop trade relations
we believe that our increased funding will allow us to establish
an organisation that provides leadership in Indo-UK relations.
We will be focusing on a few key areas in this financial year:
I. Integrated Support Services—Last
year's TISC report identified that `there is a large number of
UK bodies seeking a role in trade and investment with India. Too
often the result has been duplication and competition'. In order
to provide a plan to rationalise this duplication and provide
a single face, we are carrying out a study to map the landscape
of support services for Indo-British trade. We are working with
regional development authorities and other organisations to understand
which support services are available and how they are delivered.
In addition to the UK organisations, we have interacted with Indian
"users" of such services. The feedback we have gathered
suggests that competition and duplication by UK agencies in India
is at best creating confusion, and at worst creating a negative
perception of the UK's ability to approach India in a joined-up
way. The outcome of our study will be a proposal for how the IBPN
can work with the RDAs and other agencies to synchronise efforts,
provide real value to UK businesses and ensure that best practices
are shared across regional groups. Rather than becoming direct
competitors, the IBPN sees its role as service providers for RDAs
by working closely with UKT&I.
II. The second and important area of our
focus will be what we call "Next Generation" India.
We believe that UK needs to tie into "modern" India
and have devised 3 programmes to meet this target
(a) A social networking facility for all
young people working in "India" teams across the country.
Often of South Asian origin, these young people have been expressing
a need to come together, share work experiences in India and learn
from each other. Using the web and a series of events we will
create this network thus enabling a new group of Britons to engage
with the IBPN and engage both government and business leaders
with new ideas and thoughts. This programme was developed with
the knowledge that the success of the US-India relationship was
based on the Indian diaspora, energised within areas such as Silicon
Valley. We will also link into groups such as the CII's `Young
Indians' initiative.
(b) In association with major British Universities
we intend to establish an internship programme allowing UK MBA
students to spend a period of work experience with major Indian
firms. We believe that such a programme will build a foundation
of mutual understanding and seed long term networks between the
two countries
(c) A programme to raise the profile of
the opportunity for UK venture capitalists to invest in early
stage businesses coming out of India. We will work with IBPN board
member Alpesh Patel to create a business plan competition that
will showcase the best ideas from India and offer these as live
investment opportunities. This will provide a platform to demonstrate
untapped opportunities to the UK investor community. Alpesh is
well placed to lead this project through his role as a UKTI Global
Entrepreneur Programme "Deal-maker". On his visits to
India he looks for bright entrepreneurs, scientists and innovators
to match with UK investors.
Finally, we are keen to commission research
in order to deepen the understanding of UK India trade relations
and promote new thinking in the area. Here we are working with
think-tanks such as DEMOS and organisations such as Freshminds,
the Indian business centres in the business schools of the universities
of Oxford and Cambridge and the Rajiv Gandhi Centre at Imperial
College London.
In addition to the above we are talking to a
range of businesses to understand their India needs so that practical
support can be provided by the UKIBC to complement the services
offered by UKT&I both in the UK and in India.
We believe that through thought leadership,
the building of new models of engagement and practical business
assistance we will be able to bring focus to UK's India engagement
and greatly enhance trade and investment between these two great
nations.
July 2007
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