Memorandum submitted by UK Trade &
Investment
INTRODUCTION
The Government welcomed the Trade and Industry
Select Committee's 2006 report on Trade and Investment Opportunities
with India as both useful and timely in informing UK Trade
& Investment's (UKTI's) new strategy, particularly with regards
to commercial activity with India. The report 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.
A "one year on" review is similarly
welcome. This memorandum informs the Committee of the work that
has gone on over the last 12 months. It addresses the concerns
laid out in the 2006 report, in particular the addressing of continuing
barriers to trade; and the need to raise the game on the promotion
and support of trade and investment opportunities in India.
Significant progress has been made by UKTI over
the last 12 months. The first UK-India Investment Summit was inaugurated
in the latter part of 2006. Attended by both Prime Ministers,
it is a model for senior level engagement on UK-India commercial
issues. Other UK Ministers have maintained a sustained focus on
India with engagement with their Indian counterparts at home and
abroad.
During the period, the momentum has been gathering
with the roll out of UKTI's five year strategy Prosperity in
a Changing World. UKTI has increased India related resources
and activity significantly.
The Committee's concerns regarding poor understanding
by UK businesses of the Indian market and the perceived view of
India as a source of low cost labour rather than as an emerging
economy are being addressed, as are their concerns about promoting
the opportunities for manufacturing and wider investment. Awareness
raising programmes in the UK, media briefings and practical support
for businesses engaging with India are some examples of the work
being done by UKTI to change perceptions.
By the end of the year UKTI will have increased
by nearly 20% the number of front line commercial staff at work
in India as well increased its resources and effort in marketing
the UK as a "compelling proposition". The City Strategy
which promotes the opportunities represented by the UK financial
services sector in priority markets of which India is one, is
already being rolled out. UKTI's High Growth Market Programme,
aimed at assisting mid-corporates understand and engage with India
(and 15 other emerging economies), is also in the process of being
delivered.
The multiplicity of UK regional institutions
supporting trade and investment in India are being addressed through
a wider of review representation overseas and division of work
on trade and investment within the UK to maximise effectiveness
and efficiency. A few have now decided to co-locate their offices
with our diplomatic posts in India. The UK-India Joint Economic
Trade Committee (JETCO) continues to be driven forward and remains
active on specific trade and investment issues raised by business,
providing input to government policy and building bilateral links
and developing commercial opportunities. The Indo British Partnership
Network (IBPN) is in the process of being transformed into the
India Britain Business Organisation (IBB Org). IBB Org,[29]
which with UK Government funding of £1 million will meet
the aspiration the Trade and Industry Committee expressed in its
2006 report for IBPN.
1. THE CHANGING
INDIAN ECONOMY
1.10 The transformation of India from an
inward looking economy into one of the fastest growing economies
in the world has accelerated since 2000. The Indian economy has
averaged an 8% GDP growth for three consecutive years since 2000
and above 9% for the last two (9.4% in 2006-07). The growth has
been well spread across all sectors; Manufacturing grew by 12.3%
in 2006-07 against 9.1% in the previous year, while trade, hotels,
transport and communication grew by 13% against 10.4%. Mining
and quarrying grew by 5.1% during 2006-07 against 3.6% in the
previous fiscal, while electricity, gas and water supply registered
7.4% growth against 5.3%. Community, social and personal services
grew by 7.8% against 7.7%. Agriculture and allied sector's growth,
however, slowed down to 2.7% against 6% and construction to 10.7%
against 14.2% last year. Growth in the services relating to financing,
insurance, real estate and business also slowed down to 10.6%
against 10.9% last year.
1.12 The structural shifts in the Indian
economy have been distinctive. The decline in the share of agriculture
to total value added in the economy from 28% in 1999-2000 to 18.5%
in 2006-07 was initially picked up by the services sector, which
has seen double digit growth since 2002-03 and contributed to
54% of GDP in 2006-07. More recently, there has been a revival
of the industrial sector, its growth rate doubling from 6% in
2002-03 to 12.3% in 2006-07, largely due to increased domestic
demand. This has led to large scale expansion as the sector was
previously operating at almost full capacity.
1.13 Inflation in India reached a two-year
high of 6.63% in February 2007, well above the tolerance threshhold
of 5.5% set by the Reserve Bank of India. It has since receded
following the adoption of various fiscal and monetary measures.
The appreciation of the Indian rupee (vis á vis the US
dollar) due to a large inflow of foreign exchange has also helped
reduce inflation through cheaper imports.
2. TRADE FIGURES
AND FDI FLOWS—UK
POSITION IN
MARKET
2.1 Summary
2.1.1 UK exports to India remain strong,
but are not growing as fast as our competitors. But UK investment
is high—reflecting the fact that many companies are using
non-export models to pursue their business with India, for example,
business process outsourcing (BPO), local manufacturing and tech
transfer etc. UK exports of services (a major part of our export
mix) are hampered in some sectors by regulatory issues. If these
barriers are removed, we would expect our services exports to
grow strongly and Government will continue to lobby for their
removal.
2.1.2 Indian investment into the UK is growing
fast with a large number of projects. Tata's takeover of Corus
and United Breweries recent announcement of the takeover of Whyte
and Mackay should bring India into the big league of investors
in terms of value in 2007.
2.2 Goods and Services
Office for National Statistics (ONS)
2.2.1 ONS latest full year figures (2006)
show the value of UK/India bilateral trade under the combined
heading of goods and services stood at £8.74 billion. UK
exports of goods and services to India grew by 22.6% from 2004-05
and a further 4.4% to 2006 to over £4.1 billion. Conversely
imports of goods and services from India in 2006 grew to over
£4.6 billion. ONS calculate that in 2006 1.1% of the goods
and services imported into the UK came from India against the
1.1% of UK exports that went to India:
UK-India trade in Goods and Services (ONS)
| | |
| |
| UK exports to India | 2004
| 2005 | 2006 |
change 06/04 |
| | |
| |
| — Goods | £2,235m
| £2,798m | £2,695m
| 21% |
| — Services | £981m
| £1,146m | £1,424m
| 45% |
| — Goods and services | £3,216m
| £3,944m | £4,119m
| 28% |
| | |
| |
| | |
| |
| | |
| |
| UK imports from India | 2004
| 2005 | 2006 |
change 06/04 |
| | |
| |
| — Goods | £2,290m
| £2,783m | £3,136m
| 37% |
| — Services | £1,095m
| £1,247m | £1,485m
| 36% |
| — Good and Services | £3,385m
| £4,094m | £4,621m
| 37% |
| | |
| |
| | |
| |
2.2.2 According to HM Revenue and Customs the sectors
with the highest share of UK exports of goods to India in 2006
were:
| — Non-metallic mineral manufacturers (almost entirely diamonds):
| 41.5% |
| — Power generating machinery and equipment:
| 6.7% |
| — General industrial machinery and equipment:
| 4.9% |
| — Other transport equipment: |
4.7% |
| — Metalliferous ores and metal scrap:
| 4.5% |
Eurostat Comtext database
|
|
2.2.3 Eurostat, for which 2006 figures are available,
indicates a decline between 2005 and 2006 in the exports of UK
goods to India. The UK is nevertheless ranked 3rd in the league
of EU exporters to India, with only Germany and Belgium ahead,
or Germany and France if the exports of diamonds are excluded:
Ranking of leading EU exporters of goods to India (Eurorstat)
| | |
|
| Exports of goods to India | 2005
| 2006 | change
|
| | |
|
| Germany | €4,143m |
€6,115m | 48% |
| Belgium | €5,173m |
€4,614m | -11% |
| United Kingdom | €4,617m
| €3,953m | -5% |
| France | €1,977m | €2,522m
| 28% |
| Italy | €1,679m | €2,170m
| 29% |
| Netherlands | €908m |
€1,133m | 25% |
| Sweden | €751m | €1,068m
| 42% |
| | |
|
| | |
|
| | |
|
| Exports of goods to India (Excluding diamonds)
| 2005 | 2006 |
change |
| | |
|
| Germany | €4,141m |
€6,111m | 48% |
| France | €1,976m | €2,522m
| 28% |
| United Kingdom | €2,544m
| €2,325m | -9% |
| Italy | €1,679m | €2,170m
| 29% |
| Netherlands | €908m |
€1,133m | 25% |
| Sweden | €751m | €1,068m
| 42% |
| Belgium | €751m | €708m
| -6% |
| | |
|
| | |
|
2.3 Investment Flows
India in the UK
2.3.1 2005-06 saw a 111% rise in the number of inward
investment projects from India recorded by UKTI reaching 76 (including
mergers & acquisitions) worth £1.02b billion. UK Jobs
created/safeguarded from total FDI reached 4,172, itself a 144%
increase over the previous year where jobs associated with Indian
investment projects advised to UKTI stood at 1,711.
2.3.2 The UK receives approximately 60% of all Indian
investment coming into Europe. Indian investment is spread across
the UK although London does receive by far the largest share (30%
over the last five years).
2.3.3 There are nearly 500 Indian companies with a base
in the UK of which approximately two thirds are in the ICT/software
sector, the next significant knowledge sector being pharmaceuticals.
Examples of major Indian investment announced in the last 12 months
are Tata's US$ 9 billion (£4.5 billion) acquisition of Corus
Steel.
2.3.4 Since the Indian Government relaxed foreign exchange
controls there has been a significant increase in the number of
Indian companies who have turned to overseas acquisition as a
method of market entry. This is driven by a desire to be close
to their customers, gain market access, but increasingly as part
of an Indian business strategy to increase income from overseas
portfolios.
2.3.5 The London Stock Exchange has 23 Indian companies
listed on the main exchange which is more than the New York and
NASDAQ exchanges combined. They include the State Bank of India,
Tata Tea (owners of Tetley) and Ashok Leyland.
UK in India
2.3.6 The UK's investment stock in India by the end of
2006 placed the UK 3rd behind Mauritius and the USA up from 4th
place behind Singapore in 2005 (total stock figures 1991—Dec
2006). Stock values for the top three investors at the end of
2006 being:
| — Mauritius: | $16bn
|
| — US: | $5.6bn |
| — UK: | $3.6bn |
| |
The UK's investment profile, will be greatly enhanced by
Vodafone's recent US$11.1 billion (c£5.5 billion) investment
in Hutchison ESSAR Ltd, India's 4th largest mobile operator. It
represents the largest ever investment by a UK company in India
and is one in which UKTI played a role.
3. BILATERAL ENGAGEMENT
3.1 Summary
3.1.1 An important role for UKTI in India is pressing
for market liberalisation, especially in the following areas:
— Financial services—banking, insurance, capital
markets
— Wine and Spirits (whisky)
Financial services: Progress is likely to be slow (though
the Government of India has a "road map" for action
in 2009). The Government faces strong opposition from the Left
parties, which has made it difficult to introduce the insurance
bill so far this year.
Legal services: We have intensified our dialogue with the
Law Ministry and Bar Council, who have given encouraging signs
that they are actively looking at liberalisation. The Law Minister
is expected to visit the UK later this month (June), when we hope
we shall see more progress.
Accountancy: UKTI has joined with UK companies through the
JETCO process in a successful effort to drive forward a dialogue.
The Limited Liability Partnership Bill, which is expected to be
passed this year, will address several of the concerns held by
UK and international accountancy companies (eg on employing staff
and using their own brand names). Some outstanding issues will
remain, but we expect UK companies to become much more active
in the market once the LLP bill goes through.
Education: We are working with partners in India to explore
the potential for greater collaboration once the Foreign Education
Providers Bill (FEPB) has completed its passage through the Indian
Parliament. This bill as it currently stands presents some barriers
to collaboration such as large corpus fund deposits and obligations
under affirmative social action to offer subsidised places to
disadvantaged groups. We are working with influencers and decision
makers to influence the Bill if it goes to Standing Committee.
Retail: A number of major UK retailers are actively exploring
the market, though there has not been movement on opening up general
retail to FDI. The single brand (51%) and wholesale (100%) sectors
are already open.
Whisky: The Government has lobbied the Indian government
on excessive import and inter-state duties on spirits on a sustained
basis over the last four years. The European Commission has also
engaged on the issue. The EU has taken the matter to the WTO and
a complaint procedure has been launched. The Indian Government
is actively considering options for reducing additional duties.
Any reductions will require new legislation and compensating revenue
for states affected by the shortfall in duties.
3.2 Ministerial Engagement
Investment Summit
3.2.1 An early recommendation from the UK-India JETCO
was the need to bring together the top tiers of Government, business
and business multipliers to develop further the two countries
investment and trading relationship. In October 2006, UKTI organised
a UK-India Investment Summit at Lancaster House. Jointly hosted
by the Rt Hon Alistair Darling and Shri Kamal Nath, the summit
was also addressed by both Prime Ministers (Rt Hon Tony Blair
and Dr Manmohan Singh).
3.2.2 Delivered on the theme of "Global Partners—a
Shared Vision" the summit provided a platform for an open
dialogue on the key trade issues affecting the two countries.
Specific areas raised included regulatory transparency and approval
delays in the Indian Energy Sector; transfer of UK knowledge and
expertise on infrastructure; concerns over delays in the liberalisation
of the Indian banking and financial services sector; and working
to establish a telecoms regulatory framework on FDI spectrum management
and network security.
3.2.3 Dr Manmohan Singh indicated the Indian Government's
commitment to delivering a transparent, accountable, rule based
regulatory system and welcomed the involvement of Indo-British
stakeholders to inform the debate on reform. He also reiterated
the Government commitment to move forward on the further liberalisation
of the banking and insurance sectors.
3.2.4 The next Investment Summit will be held in the
autumn of 2007 in Delhi.
Ministerial and Senior Meetings
3.2.5 The Government recognises the representation and
political value of high level engagement on the resolution of
bilateral trade issues. In the intervening months since the Committee
reported, the following visits (which were either dedicated to,
or included elements of the further fostering of bilateral trade
relations as part of their agendas), took place:
HRH, The Duke of York, UK's Special Representative for
International Trade and Investment—October/November 2006.
Visited New Delhi, Mumbai and Chennai in support of UK companies
trading internationally and encouraging foreign investment. Sectors
covered included pharmaceutical, engineering, IT, mobile communications,
banking, automotive, film and business process outsourcing. His
Royal Highness also presented the first-ever UK Trade & Investment
India Business Awards in Mumbai on 1st November 2006.
Rt Hon Margaret Beckett MP, Secretary of State for Foreign
and Commonwealth Affairs—November 2006.
The Secretary of State visited New Delhi, Hyderabad and Mumbai,
meeting the Indian Prime Minister Dr Manmohan Singh, Foreign Minister
Mr Pranab Mukherjee, Finance Minister P Chidambaram, Home Minister
Mr Shivraj Patil and other senior members of the government. She
also visited a DFID funded project and spoke separately on the
growing business links between the India and the UK.
The Rt Hon Richard Caborn MP, UK Minister for Sport—November
2006.
The Minister led a 19-strong UK business delegation to meet
Indian ministers and officials involved with organising Delhi's
Commonwealth Games 2010, with a view to sharing experiences in
preparation for London 2012.
Ian McCartney, Minister for Trade, Investment and Foreign
Affairs—November 2006.
A follow-up to the India-UK Investment Summit held in London
in October. The visit endorsed the UK's continuing commitment
to developing its bilateral business relationship with India.
Kolkata and Delhi were visited to promote UK expertise in key
sectors such as Infrastructure, public private partnerships and
the power generation industry. The visit was also used to lobby
Indian Ministers on the liberalisation of the Indian economy in
key areas such as financial and legal services, to encourage Indian
companies to look to the UK as a destination for establishing
a presence in Europe and to attend the India Economic Summit.
A high-level business delegation which included senior individuals
from companies such as SERCO, British Gas and Halcrow accompanied
the Minister.
The Rt. Hon. Alistair Darling MP, Secretary of State for
Trade and Industry—January 2007.
The Secretary of State (accompanied by a 150 strong business
delegation—the largest ever business delegation to visit
India from Britain) visited Mumbai, Delhi and Bangalore. The visit
focussed on increasing bilateral trade in infrastructure, power
generation R&D and technology transfer, the Doha Development
Agenda (DDA), and taking forward the energy and climate change
agenda. In Mumbai, Mr Darling met with Indian business leaders
and Maharashtra Chief Minister Shri Vilas Rao Deshmukh. In Delhi,
Mr Darling launched the television series "Future Living:
2020" (a showcase for British technology) and also met with
Shri Kamal Nath, Indian Minister for Commerce and Industry, Power
Minister Shri Sushil Kumar Shinde and Finance Minister Shri P
Chidambaram. He also led the British delegation in the India-UK
Joint Economic and Trade Committee (JETCO) talks. In Bangalore
(with the Chancellor of the Exchequer), he attended the CII Partnership
Summit and visited some of India's leading companies.
The Rt Hon Gordon Brown MP, Chancellor of the Exchequer—January
2007
The Chancellor visited Bangalore, Delhi and Mumbai. Delivering
the keynote speech at the CII Partnership Summit (equivalent to
the CBI annual conference), he also visited some of India leading
companies (both UK investments and potential inward investors
to the UK), made calls on Prime Minister Dr Manmohan Singh, Congress
Party President Mrs Sonia Gandhi and the Indian Finance Minister
Mr P Chidambaram (to discuss and launch the Indo-British Economic
& Financial Dialogue). Mr Brown also announced and presented
the first awards under the UK-India Education Research Initiative.
The Rt Hon David Miliband MP, Secretary of State for Environment,
Food and Rural Affairs—January 2007.
The Secretary of State visited India for talks related to
climate change and sustainable development. Mr Miliband delivered
a keynote speech at the inaugural session of the Delhi Sustainable
Development Summit in New Delhi and met with Indian business leaders
to promote UK expertise and involvement in joint Indo-UK research
into climate change impacts and adaptation.
Pat McFadden, E-Government Minister—April 2007
The British e-Government Minister went to India for talks
with Indian Government Ministers and major Indian IT and software
firms. He met with Ms. Meira Kumar, Cabinet Minister for Social
Justice and Empowerment; Prithviraj Chavan, Minister of State
in the Prime Minister Office; Tata Consultancy Services (TCS)
and NASSCOM in Delhi. He also visited National Institute of Smart
Government (NISG) and Centre for Good Governance (CGG) in Hyderabad.
Mr McFadden is also the Minister for Social exclusion and his
trip included a visit to the Salam Baalak Trust Project.
The Rt Hon Baroness Ashton, Parliamentary Under-Secretary
of State for the Department for Constitutional Affairs—May
2007
Baroness Ashton Visited New Delhi, Chandigarh, Bangalore
and Chennai, meeting with Ministers and officials from the Ministries
of Commerce, Finance, Law and Justice. She also met the Chief
Justice of India, the Attorney General and members of the Bar
Council of India. In Chandigarh, Baroness Ashton attended a roundtable
meeting with Punjab and Haryana State Bar Council Officials. In
Bangalore, she visited the National Law School. She delivered
a speech on "The Role of Law in a Globalised World"
in Chennai.
Dr Kim Howells MP—British Foreign Office Minister
of State—May 2007
The Minister visited New Delhi, Kolkata, and Guwahati to
further UK-India bilateral ties. He met government officials,
representatives of local communities and inspected projects funded
by the British government. In Kolkata he inaugurated the new Diversity
& Lifestyle Zone at the British Council and the British Information
Centre in Guwahati. In Delhi he called on Senior Officials and
Ministers from the Ministry of External Affairs.
John Stuttard, The Lord Mayor of the City of London—May
2007
The Lord Mayor visited New Delhi, Kolkata, and Mumbai. Representing
the UK-based financial services, the visit focussed on exploring
how the City of London could work with the Government of India
to develop an international financial centre in Mumbai. The Lord
Mayor's week-long schedule included meetings with the Minister
of Finance, Commerce & Industry, the Mayor of Kolkata and
the Governor of the Reserve Bank of India. In New Delhi, the Lord
Mayor addressed a seminar—"Partners in Action—How
London's global financial experience can be relevant to India".
In Mumbai, he inaugurated City of London's new representative
office.
3.2.6 The Government also recognises the value of maintaining
a high level and regular bilateral dialogue with Indian Ministers
while they visit the UK.
3.3 Joint Economic Trade Committee (JETCO)
3.3.1 UKTI continues to drive forward the UK-India Joint
Economic and Trade Committee (JETCO) process, lobbying the Government
of India on specific trade and investment issues as well as building
links and opportunities for business.
3.3.2 A third meeting of the JETCO took place in New
Delhi in January 2007, co-chaired by the Rt Hon Alistair Darling
MP, Secretary of State for Trade and Industry and Shri Kamal Nath,
Minister for Indian Commerce and Industry. A mixture of one-to-one
and plenary sessions, the event focussed on the successes delivered
so far (eg, air services liberalisation and agreement on co-operation
in the creative industries), new initiatives resulting from the
October 2006 UK-India Investment Summit (such as a strategy to
maximise UK involvement in India's planned US$320 billion infrastructure
investment) and the progress made by the Working Groups.
3.3.3 Both Ministers reaffirmed JETCO's value in helping
realise the vast potential for increased bilateral trade and investment
flows between the two countries. The meeting also covered the
Doha Development Agenda, the role of the Indo British Partnership
Network (now IBPN) as a prime business to business facilitator
of bilateral trade and an agreement that the Investment Summit
should be an annual feature, the location alternating between
India and the UK.
3.3.4 Both Ministers accepted a recommendation that each
JETCO Working Group should continue to concentrate on the areas
of their respective sectors where real delivery can be achieved
and that they should continue to offer policy advice to senior
officials. A mid-year bilateral Senior Officials meeting (scheduled
for 5 July 2007 in Delhi) will review the progress and consider
the areas for future action by the two governments.
3.3.5 The current Working Groups are:
Accountancy Services: The reciprocity in the recognition
of professional qualifications and removal of restrictions preventing
or restricting foreign practitioners from entering the market
is the main issue for this group. They are making encouraging
progress. A detailed review has been undertaken of the respective
examinations and syllabi as a foundation for taking forward discussions
with the professional bodies. Talks on reciprocal membership between
the Institute of Chartered Accountants of India (ICAI), the Institute
of Chartered Accountants in England and Wales (ICAEW), the Institute
of Cost and Works Accountants (ICWA) and the Chartered Institute
of Management Accountants (CIMA) are progressing. A Limited Liability
Partnerships Bill, which will increase the maximum size and number
of partners, has been introduced in the Indian Parliament. This
will remove a technical barrier for larger UK firms to participate
in professional services when each sector is liberalised.
The UK accountancy profession has also expressed concerns
over the limits on the number of students that can be trained
in India to become accountants. The working group have been advised
by the ICAI that they have given their formal support to a significant
increase in the quota. This now awaits final approval by the Indian
Government.
Agri-Business: JETCO-linked visits have resulted in the signing
of an agreement between Punjab Agro Industries Corporation Limited
and British Agrifood Consortium Limited for consultancy services
to establish international quality norms for the agri-produce
of Punjab. In addition to the initial contract this will enhance
opportunities in Punjab for other UK companies. JETCO activities
have also led to the signing of an MOU between Campden and Chorleywood
Food Research Association (CCFRA) and the Confederation of Indian
Food Trade Industry for CCFRA to deliver training and R&D
services to the Indian agrifood industry.
The JETCO Agri-business Group has identified a strong need
for investment in farming technology, developing products for
market and logistics including cold storage and packaging (some
30-40% of Indian produce perishes before reaching market). UK
retailers are actively looking at investment opportunities beyond
the current sourcing of produce from India.
Financial services: This is a new group that was established
in January 2007.The group's objectives include:
— Identifying limitations on market access and exploring
the potential for removing barriers.
— Highlighting the benefits of effective regulatory
regimes.
— Promoting high standards of business practice,
market integrity and risk management.
— Promoting the socio-economic and business potential
arising from increased liberalisation of financial services.
— Developing mutual recognition agreements in financial
services.
— Improving bilateral engagement between UK and
Indian regulatory bodies.
They have also set up four separate task forces to focus
in on banking, insurance, capital markets and the venture capital
and private equity sectors.
Healthcare: Established in early 2006, the group is focussing
on a number of work streams including education, e-health and
diagnostics and is now taking work forward in these areas. A group
of approximately 50 healthcare companies and interests accompanied
the Secretary of State (as part of a wider mission) to India in
January 2007. One of the outcomes of this mission was a proposed
e-healthcare pilot project which would place diagnostic equipment
in rural areas allowing patients to be diagnosed in situ. Two
private sector hospitals have so far expressed interest—one
in Delhi and one in Mumbai. Imperial College have also recently
completed a UKTI-funded study on strategies for addressing the
growing diabetes problem in India. UKTI will work with Imperial
College to seek ways in which UK companies can both contribute
towards tackling the diabetes issue in India whilst simultaneously
developing business opportunities in the market.
Hi-Tech: There are few regulatory barriers and obstacles
in this sector. The working group has, therefore, focussed on
the development of mutual business opportunities, particularly
in the telecoms, nanotechnology and Information technology/telecoms
sectors. The ICT activities are being driven by Intellect (UK's
ICT industry body) and NASSCOM (India's IT industry body) and
are concentrated on SME development. Both are members of the working
group. Nano technology activities include a proposed visit by
UK nano companies and universities in September to India and an
inward mission to the UK NanoForum in London in November 2007.
Infrastructure: Launched in early 2007 in response to Indian
plans to spend approximately $320 billion on infrastructure improvements
over the next five years, the Infrastructure Working Group is
focusing on the increasing popularity of Public Private Partnerships
as a model for delivering large-scale infrastructure investments
in India, and the opportunity they might represent for UK technology,
management and investment flows. Specifically they are looking
to pursue engagement on sectors such as power and utilities.
Legal Services: The main focus of the Group is to secure
access for foreign law firms and lawyers to provide legal advisory
services in India. Current regulations restrict this and there
has traditionally been considerable opposition from the Indian
legal profession.
Regulation limiting the number of partners a law firm may
have and their permitted size has also been a considerable barrier
to investment. The introduction of the Limited Liability Partnerships
Act (the Bill is currently before Parliament) could resolve this
and provide a basis for foreign and local firms to enter into
partnerships. This would leave the bar on foreign lawyers practising
in India as the major remaining obstacle.
Action by the JETCO Legal Services Group plus visits by Baroness
Ashton and the Lord Mayor of London has resulted in a growing
recognition amongst the Indian legal profession of the benefits
overseas investment can play in upgrading their expertise and
the importance of international legal services in contributing
to wider economic growth. A key development was April's agreement
by the Bar Council of India to lead the Indian side of the JETCO
Working Group.
3.3.6 Whilst not the subject of a formal Industry Working
Group, the protection of Intellectual Property Rights (IPR) is
an important part of the bilateral and JETCO agenda. In June 2006,
a Joint Statement of Intent was signed between Commerce and Industry
Minister Shri Kamal Nath and Lord Sainsbury. This set out a number
of areas for future co-operation, including the training and management
of patent and trademark officials, development of patent and trademark
attorneys, the sharing of best practice on infringements and increasing
awareness and understanding of the use of Intellectual Property
by business. Since then the UK Intellectual Property Office has
been active in taking forward a number of initiatives, including
assisting the Indian Intellectual Property Office to prepare for
its application as an International Searching Authority.
3.4 DOHA Round
3.4.1 The Government continues to press for an ambitious,
pro-development outcome to the Doha Development Agenda (DDA) negotiations.
The first priority of both the UK and EU is to conclude the DDA,
recognising that multilateral trade agreements deliver substantially
greater benefits than bilateral trade agreements. However, we
recognise that bilateral agreements can generate real benefits,
provided that these compliment the multilateral trading system.
3.4.2 India in turn remains committed to achieving a
successful outcome to the Doha Round, although remains concerned
about the vulnerability of its agriculture sector—which
it is seeking to protect through maintaining high bound tariffs
and the use of special products and special safeguard mechanisms.
India is also keen to see developed countries reduce subsidies
and make substantially greater commitments to liberalise their
own goods and particularly services markets.
3.4.3 Negotiations were suspended in July 2006 and restarted
again in January 2007 at the World Economic Summit at Davos. A
combination of G4 (Brazil, EU, India and the US) and national
bilateral and plurilateral meetings are informing the ongoing
negotiations in Geneva, with aim achieving consensus by the end
of 2007.
3.5 EU-India Free Trade Agreement
3.5.1 It is noted that Committee is aware and had inquired
separately into the European Commission's announced intention
in October 2006 to pursue negotiations on a bilateral free trade
agreement with India.
3.5.2 The Government recognises the agreement is an important
and welcome initiative. It will be instrumental in deepening and
liberalising further the EU's trading links with India which can
only be beneficial to UK commercial interests.
3.5.3 While welcoming the Commission's decision to enter
into bilateral negotiations our position remains as stated above,
that the priority stays with the achieving of a successful outcome
to the Doha Round. The UK has pressed and will continue to press
for EU negotiations with India to be complementary to the DDA
and build on the wider multilateral process.
3.5.4 Whilst the EU negotiates on behalf of members on
trade policy, the UK will continue to work with the European Commission
and other member states to ensure that the EU-India Free Trade
Agreement is consistent with our ambitions for liberalisation
and greater market access covering trade in services as well as
goods.
4. UKTI SUPPORTING UK BUSINESSES
IN THEIR
PERCEPTION, KNOWLEDGE
OF AND
ACCESS TO
THE INDIAN
MARKET
4.1 UKTI India Staff Resources
4.1.1 Since the Committee published its report in 2006,
UKTI staff resources have been increased across Team India. At
the time of the report 74 staff were dedicated to full time commercial
work in India. By the end of the current financial year that number
will have risen to 88, an increase of nearly 20%.
4.1.2 The additional staff will reinforce the delivery
of front line UKTI support, aimed at seeking greater opportunities
for trade and investment. The Science and Innovation network is
also doubling its resource in India to 10 staff. This team is,
critical to identifying and delivering R&D opportunities.
4.2 UKTI Marketing
4.2.1 In July 2006, in launching its strategy "Prosperity
in a Changing World", UKTI made a strong commitment to the
professional, world-class and cohesive marketing of the UK as
a place in which and with which to do business.
4.2.2 The marketing message focuses on the UK as an investment
multiplier, a springboard to international growth and a location
that upgrades the value of company's investment. This is born
out of the understanding that many companies invest in the UK
not only because of the home market but because it improves their
overall competitiveness in today's globalised economy.
4.2.3 UKTI, in recognition of the need to tailor this
message to the Indian market, appointed in April of this year
(2007) a new locally engaged member of staff to become the Marketing
Manager for India. Examples of recent activities include:
UK Trade & Investment India Business Awards 2006
— The UK Trade & Investment India Business Awards
were announced in September 2005, coinciding with the PM visit
to New Delhi. Designed to recognise and celebrate UK—Indo
business partnership, specifically in terms of inward investment,
collaborative business partnership, entrepreneurship and innovation;
the first special recognition awards was presented to Tata Consultancy
Services by PM Tony Blair.
— The awards were presented on 1 November 2006 at
a ceremony chaired by HRH, The Duke of York in Mumbai. Six companies
were recognised under the six different award categories with
Special Recognition for the co-chairmen of IBPN. The event generated
media coverage close to £175 K excluding the CNBC news telecast.
The Public Diplomacy Initiative
A multi faceted initiative, commissioned jointly by the British
High Commission and the British Council to "inspire India's
rising generation of decision makers to choose the UK". The
initiative saw a series of events and activities in the fields
of arts and culture, business, education, environment and science
and technology:
— Arts & Culture: An adaptation of A Midsummer's
Night's Dream was toured in India to critical acclaim. In doing
so it was instrumental in positioning and raising the perception
of the UK as a strong leader in the cultural field. Additionally
the "India's Creative Future" initiative received over
1,200 business proposals and by the time of its awards ceremony
in February 2007 had successfully raised the profile of the UK
as a source of creative ideas with 3,000 creative professionals
directly.
— Education: The public diplomacy initiative created
two main educational programmes. 1) Education UK roadshows—a
series of travelling events that visited 14 cities and reached
out to 105,000 young people 2) Scholarship Hunt—a TV reality
show with NDTV. This initiative was delayed due to difficulties
between NDTV and the universities. This programme is now due to
go live this summer and promises to be a significant contribution
to interest in UK education.
— Environment: The "Environment Enterprise"
initiative witnessed seminars, workshops and surrounding events
planned on two topics—the science of climate change and
the impacts of climate change on bio-diversity and sustainable
development. The events were instrumental in bringing about a
step change in awareness of the UK's excellence in climate change
research—positioning the UK as world leader in this field
and favoured partner for future collaboration with India.
— Science & Technology: Initiatives included
"Vision 2020—Future Living" a six part science
and technology TV series showcasing British innovation and technology
(aired in March 2007 reaching 34 million households.); "Science
and Technology in Sports", the development of a series of
messages highlighting the UK's contribution to technology in the
field of sport; and the "Did You Know" advertising campaign,
cutting across all five themes of the diplomacy initiative, highlighting
British innovation and creativity.
The World Economic Forum in Delhi
4.2.5 Advertising campaign initiated over the period
of the Forum in November 2006 promoted the UKTI Business Awards
(see above) by printing the case studies of four of the recent
award winners.
Bangalore Bio 2006
4.2.6 Extensive advertising showcasing the UK's strengths
in Biotechnology, including a short case study highlighting the
Dabur and India-UK bio-collaboration. UKTI will also be participating
in Bangalore Bio, taking place in June 2007.
4.3 Regional Representation in India
4.3.1 In response to the Committee's concerns over the
need for a strategic framework to deal with the multiplicity of
UK agencies (other than UKTI) operating in India on inward investment
promotion, UKTI continues to pursue the initiative outlined in
the UKTI's 2006 Strategy document: "Prosperity in a Changing
World". Namely that by March 2008, UKTI will have worked
with the Devolved Administrations and the Regional Development
Agencies to review their representation overseas and maximise
effectiveness, ensuring that they deliver what is the best for
the UK in a coherent manner.
4.3.2 In the 12 months since publication of the Committee's
report Arthur D Little (ADL) have been commissioned to research
and analyse the operation of RDA and Devolved Administrations
overseas offices undertaking inward investment work alongside
those of UKTI. ADL will also make comparisons with the overseas
operations of other countries. This is well underway. ADL have
produced a first stock-take of overseas offices, have begun work
on the options for investment attraction overseas and begun to
consult stakeholders. ADL has also been contracted to survey business
on their perspectives of the UK's overseas inward investment attraction
arrangements. They will report their findings in July 2007.
4.4 Indo British Partnership Network (IBPN)
4.4.1 The Trade and Industry Select Committee recommended
in its 2006 report " . . . that a decision is 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)
4.4.2 From the current financial year (2007-08) UKTI
is putting in place a significantly increased level of budgetary
support for the IBPN: increased to £1 million per annum from
the previous £75k per year. Match-funding will be sought
by the organisation through a mixture of corporate sponsorship,
membership charges plus the provision of chargeable services.
4.4.3 The IBPN will be re-branded to recognise the step
change in its activities as the India Britain Business Organisation
(IBBOrg). IBBOrg's objectives will be to:
— provide a networking forum committed to furthering
trade and investment between the UK and India;
— contribute to the objectives of the Joint Economic
Trade Committee (JETCO); and
— inform Government on Indo-British trade and investment
issues.
The IBBOrg will use the additional funding to extend its
capability, reach and ability to advise companies on the opportunities
to do business with India while providing practical advice on
engagement with the market. In doing so, UKTI believe that it
will align itself closely with the aspiration the Committee expressed
for the IBPN in 2006.
4.4.4 A Chief Executive Officer (CEO) is currently being
recruited and is expected to be in place by summer 2007. An Advisory
Board made up of leaders of major UK companies will guide the
strategy of the organisation. An operational board, composed initially
of the current IBPN members, will also oversee the work of IBBOrg.
4.4.5 IBBOrg will be based in London and in the future
will develop a presence elsewhere in the UK as agreed with local
partners. In India, it will grow its capability within the ambit
of UKTI's offices in the country to provide a complementary service.
4.5 India in the UK
4.5.1 It is recognised that the dialogue bilateral trade
issues is facilitated and enhanced by maintaining a close relationship
with not only Indian Government representation in the UK but also
those who are here to represent the interests of Indian commerce
(ie the private sector multipliers).
4.5.2 UKTI maintains close and open links with the High
Commission for India as well as the principle trade bodies, which
include the Confederation of Indian Industries (CII), the Federation
of Indian Chambers of Commerce and Industry (FICCI)—the
latter only recently having set up for the first time a full time
representation in the UK.
4.5.3 NASSCOM the body that represents the interests
of the Indian Information Technology companies in recognition
of the greater opportunities for bilateral trade in the sector
has an announced its intention establish a UK office. Additionally
they have agreed to partner with Intellect, the trade association
for the UK High tech Industry on SME development.
4.6 City Strategy (Promoting UK financial services)
4.6.1 The Chancellor's Budget statement of March 2006
announced that UKTI was developing the overseas promotional strategy
for UK financial services. This strategy draws on the Treasury-led
analytical work and the views of a wide range of private and public
sector stakeholders.
4.6.2 The City Strategy seeks to promote the world leading
financial services encapsulated in London and the complementary
strengths of the financial and related business services across
the UK. UKTI established a new Financial Services Sector Advisory
Board (FSSAB) that has met three times since its inauguration
in December 2006. Recent milestones include:
— Successful trips to India by the Chancellor and
Trade and Industry Secretary Alistair Darling in January plus
the visit by the Lord Mayor in May, that have seen commitments
from the Indian Government on market access for financial services,
including steps taken so that Lloyd's of London would be allowed
to operate in India.
— The approval of dedicated strategies for India
(and China) at the third meeting of the FSSAB on 2 May 2007.
— The reinforcement of the UK financial services
profile in India by the arrival of new diplomatic staff dedicated
to the financial services sector in Mumbai.
— The joint partnership production of new UK financial
services promotional materials (website and brochure); the brochure
was launched by the Lord Mayor of London in India on 21 May 2007.
— The development of a new strategy to promote the
UK as a world leading centre for Islamic finance.
4.7 High Growth Markets Programme
4.7.1 Following research undertaken by UKTI for by the
Asia Task Force it was decided that UKTI needed to widen its support
to include mid-corporates as well as its current work with small
and medium size enterprises.
4.7.2 As a result, UKTI launched in the early part of
2007, the £2.4 million "High Growth Markets Programme"
(HGMP), the specific objectives of which are to:
— Learn and disseminate lessons about why experienced
exporters and established companies with potential to succeed
are not more active in the high growth markets.
— Develop and deliver tailored support services.
— Generate more activity and interest in the high
growth markets by UK-based companies.
4.7.3 The programme will focus on 16 specific high growth
economies including India. 15 High Growth Market Specialists will
engage with UK companies with the potential to succeed. Each Advisor's
role will be to:
— Manage a relationship with up 65 medium-sized
UK target companies per annum.
— Assist those companies exploit opportunities in
the high growth markets by offering market entry or business development
advice.
— Capture ground level market intelligence on new
trade opportunities, trends and developments to stimulate export
activities.
— Capture data on the current and future challenges
for UK companies operating in markets to help inform Government
policy.
4.8 Inward/Outward Missions
4.8.1 A central plank to creating market awareness and
fostering business exchange remains UKTI's support for Inward
and Outward Missions. In the calendar year 2006, UKTI supported
over 40 outward missions to India covering diverse industry sectors
including biotech (to Bangalore), construction (to Chennai), oil
& gas (to Delhi, Ahmedabad and Mumbai) and automotive (to
Pune).
4.8.2 The first quarter of 2007 (Jan-to March) points
to an up turn in activity with some 23 mission having taken place
as compared to 19 in the same period in 2006.
4.9 Visas and Work permits
4.9.1 The Committee's 2006 report raised concerns about
the issue of Visas and Work Permits—in particular the minimum
permissible stay for high quality students from India and about
the reduction of impediments to skilled workers (ie in the IT
sector) entering the UK.
Visas
4.9.2 The Government remains committed to facilitating
legitimate travel between India and the UK. India is the UK's
largest visa operation world-wide. In 2006 a record number of
visas were issued. Numbering just over 336,000, they represented
83% of the applications made and an almost 20% increase on visas,
issued in 2005. 27,039 work permits were also issued in 2006,
a 32% increase on 2005.
A category of contact less well served by visas are research
scientists making frequent visits to UK over significant periods
of time. The Government is assessing the viability of introducing
a five-year research visa for this purpose.
Students
4.9.3 The flow of students to the UK is rising. More
than 23,000 Indian students are currently studying in the UK.
In addition, increasing numbers (currently 5,000) are studying
for UK qualifications in India, via distance learning partnerships
with UK accredited institutions.
4.9.4 The Government, working with the British Council,
is committed to increase the number of students coming to the
UK to study further—in 2006 some 20,000 student visas were
issued. On 1 May this year the International Graduates Scheme
(IGS) was launched. As an extension of the former Science and
Engineering Graduates Scheme, the IGS expands the eligibility
criteria to the completion of a bachelor's degree in any subject.
It removes the minimum 2:2 classification and now applies to those
with post-graduate certificates and diplomas. It will allow an
eligible non-EEA national to remain in the UK for a specified
period of time on completion of their studies to, seek employment.
4.9.5 The UK India Education and Research Initiative
(UKIERI) also continues to improve substantially educational links
between the UK and India so that we become each other partners
of choice in education. Consisting of three main strands, the
initiative covers: Higher Education and Research; Schools and
Professional and Technical Skills. The UK is investing £14
million in increasing educational links—supported by a further
£4 million from corporate champions BAE SYSTEMS, BP, GSK
and Shell. We estimate that UKIERI has almost doubled substantial
educational linkages between the UK and India in its first 18
months (adding 190 new linkages). In addition it ran around 25
significant events.
Highly Skilled Migrant Programme (HSMP)
4.9.6 The Government is committed to attracting the brightest
and the best from around the globe to work and study in the UK
as part of its managed immigration strategy.
4.9.7 The Highly Skilled Migrant Programme was introduced
in January 2002. It was designed to allow highly skilled people
to migrate to the UK to look for work or self employment opportunities.
Some changes were made to the HSMP rules in November 2006 as part
of the transition to the new points-based system (PBS) which was
announced by the Home Office in April 2007. In line with aspirations
for PBS the changes were designed to make the programme more transparent,
the criteria more measurable and objective and to ensure that
the programme continues to attract those highly skilled migrants
who can make a contribution to the UK economy—the new criteria
being a better predictor of economic success.
Points-Based System (PBS)
4.9.8 The points-based system (PBS) is an integral part
of the Government's Five Year Strategy for Asylum and Migration
(published in 2005). PBS will streamline the existing routes for
study and work in the UK to five broad tiers and make the selection
criteria more objective. It is also intended to allow selection
of those most able to contribute most economically and to reduce
scope for the abuse of the immigration process. Tier 1 (highly
skilled migrants) will be the first to be rolled out at the beginning
of 2008.
Intra-Company Transfers
4.9.9 The contribution of Indian employees to UK based
companies is well recognised. They will be allowed to continue
entering the UK under the new Points Based Programme (Tier 2).
Under this system, the requirement that the worker needs to demonstrate
company-specific knowledge will be removed in favour of increased
compliance checking of the requirement that the person is paid
a salary appropriate to the UK. This reflects more closely the
current needs of multinational employers and will deliver maximum
economic benefit to the UK.
4.10 Corporate Social Responsibility and Caste Issues
4.10.1 The Government remains committed to ensuring that
business takes account of the social and environmental impacts
of their activities worldwide and follow the principles outlined
in the international instruments on Human Rights. All UK businesses
are encouraged to comply with the laws of the country in which
they operate and the UK Government continues to endorse a range
of international activities designed to encourage responsible
business behaviour, including the OECD Guidelines and UN Global
Compact on corporate behaviour.
4.10.2 Discrimination is inconsistent with the standards
that UK applies and is illegal in India. As the Committee will
be aware, the Baroness Royall, representing the UK Government,
supported the UK launch of the Ambedkar Principles in July 2006.
4.10.3 Under a joint action plan established during the
UK EU Presidency, the Government continues to maintain, via the
EU, a regular and active dialogue on human rights with officials
from the Government of India. The issue of minorities (including
Dalits and caste based discrimination) last being discussed with
Indian officials at the latest EU-India Human Rights dialogue
which took place in Delhi during March 2007.
4.10.4 DFID also remains committed to playing its part
in addressing caste-based discrimination. Its programmes in India
specifically monitor the impact on Dalit community and other disadvantaged
groups, where it is appropriate to do so ie in education, health
and access to justice.
ONS 2006 FULL YEAR FIGURES
ONS lastest full year figures (2006) show the value of UK/India
bilateral trade under the combined heading of goods and services
stood at £8.74 billion. UK exports of goods and services
to India grew by 22.6% from 2004-05 and a further 4.4% to 2006
to over $4.1 billion. Conversely imports of goods and services
from India in 2006 grew to over £4.6 billion. ONS calculate
that in 2006 1.1% of the goods and services imported into the
UK came from India against the 1.1% of UK exports that went to
India:
UK-India trade in Goods and Services (ONS)
| | |
| |
| UK exports to India | 2004
| 2005 | 2006 |
change 06/04 |
| | |
| |
| — Goods | £2,235m
| £2,798m | £2,695m
| 21% |
| — Services | £981m
| £1,146m | £1,424m
| 45% |
| — Goods and Services | £3,216m
| £3,944m | £4,119m
| 28% |
| | |
| |
| | |
| |
| | |
| |
| UK imports from India | 2004
| 2005 | 2006 |
change 06/04 |
| | |
| |
| — Goods | £2,290m
| £2,783m | £3,136m
| 37% |
| — Services | £1,095m
| £1,247m | £1,485m
| 36% |
| — Goods and Services | £3,385m
| £4,094m | £4,621m
| 37% |
| | |
| |
| | |
| |
29
IBB Org was the working title for the re-branding of IBPN. In
the event the UKIBC title was thought to better reflect the aspirations
of the new organisation. Back
| 
