Indian Prime Minister Narendra Modi’s visit to the UK comes at a time when the UK-India business and economic relationship is strong and moving with a positive momentum…writes Richard Heald, CEO, UK India Business Council
A number of significant announcement were made on the first day of the visit. The Prime Ministers announced that they had signed a civil nuclear agreement. And over £9bn worth of deals were announced, across a range of sectors, including in IT and Cyber with increased investment of £1.3bn announced in India by Vodafone; in Healthcare with the roll-out of 11 medicities, the first one of which will be with Kings College Hospital; in solar, LightSource Renewable Energy Holdings announcing some £2bn investment in India over the next 5 years, and UK listed OPG Power Ventures plc announced that they will invest £2.9bn in India to create some 4,200 megawatts (MW) of new power capacity in India, of which 1,000 MW will be in solar power and 3,200 MW will be thermal and renewable power in Tamil Nadu.
A critical objective for the UK and India was the establishment of a good working relationship between Prime Minister Cameron and Prime Minister Modi. This appears to have been achieved through the dialogue which took place over Thursday night and Friday morning at Chequers. There is now an agreement between the Prime Ministers to meet annually to continue to move the bilateral economic agenda forward.
The visit was punctuated with set piece events for public consumption – the address to the joint Houses of Parliament, the speeches of the two Prime Minister’s at the Guildhall (Watch Modi’s speech here), the lunch hosted for Prime Minister Modi by HM the Queen and the “Wembley Event”.
At the same time, from the UK and Indian business perspective, as well as from that of the UK India Business Council, the key meeting was far more private. The first meeting on Friday morning of the new UK India CEO Forum, comprising of more than 40 UK and Indian Business leaders, met at No 10 and was presided over by the two Prime Ministers.
During the meeting the Prime Ministers encouraged the senior business leaders to identify the best way to build new trade partnerships and investment opportunities between the UK and India.
Specifically, the Forum was asked to identify new areas of opportunity, promote projects which will enable these opportunities to be realised, examine bilateral issues which, if addressed, will catalyse business between the two countries, and make recommendation within regular meetings with the two Prime Ministers.
The CEO Forum members focused on the following 6 overarching themes. Going forward the vision is to involve non-Forum members in the work streams so as to maximize the identification of opportunities in:
Smart Cities and the Digital Economy
Healthcare and Hygiene
Education and Skills
Manufacturing, Defence and Security
Financial and Professional Services
Bilateral Ease of Doing Business
The UK India Business Council has been appointed as Secretariat to the UK Co-Chair, Sir Gerry Grimstone, and to the UK members.
Naturally, there was a great deal of media interest in Mr Modi’s visit. Our Chair and I had several interactions with the press and media. During our interactions with the media last week, I felt there was undue focus on visible trade rather than a holistic understanding of the current nature of economic flows between countries.
It is important to appreciate in today’s dynamic global economy, with its complex global supply chains, that visible trade is increasingly becoming a less relevant measure of economic ties between nations. Moreover, a trading engagement is often followed by an investing relationship; once a company finds success overseas through visible trade, the natural next step is to set up a presence there – which explains why the UK is one of the largest investors in India. The UK-India relationship is built on more than just visible trade and encompasses direct investment, technology transfer, jobs created and of course education and culture.
One TV programme that I’d definitely like to commend to you is “The CEO Dialogue” which the UK India Business Council organised with KPMG and CNBC-TV18. This programme was broadcast live in India and captured the views of leading UK and Indian business figures on Modi’s visit to the UK.
Indeed, recent private comments by key Indian bureaucrats are quite candid about the importance of the bilateral economic relationship – stressing that it is the strengthening bilateral business interaction over the past decade which gives the broader overall relationship such positive possibilities.
The UK has been the single largest G20 investor in India for 14 years – around 535 UK businesses currently operate in India in sectors as diverse as retail, infrastructure, construction, information and communications technology (ICT), creative industries and healthcare. In total, UK companies are estimated to employ 691,000 people in India, representing 5.5% of the organised private sector workforce in the country. For its part, India is one of the biggest investors in the UK. In 2014, investments from India increased by 65% making it the third largest source of FDI in the UK. There are more than 800 Indian owned businesses in the UK, collectively employing more than 110,000 people.
This is a message that the UK India Business Business Council has been stressing hard over the past months. I am pleased to say our own statistics are now being quoted back to us. And the critically important Indian Government department, the Department of Industrial Policy and Promotion, characterises the bilateral economic relationship as “very positive”.
India’s economy has been growing for the last 25 years. In the 18 months since Mr Modi came to power, we have seen increased business focus on the opportunities. Naturally, this has resulted in a real increased emphasis on improving elements which make up “Ease of Doing Business”. India and the DIPP have been making real efforts to improve not merely the perception but also the fact. As such it is pleasing to note that in the recently released World Bank’s ease of doing business report, India’s ranking improved by four places – a laudable start given the size of India’s economy.
This is echoed in the recent report by UK India Business Council ‘Doing Business in India: The UK Perspective’ (member only content) which collates findings of our survey and discussions with our sector policy groups. A clear majority believe it’s already become easier to do business in India since Modi came to power and, if efforts are sustained, India will make significant improvements. In particular, recent steps taken to improve India’s business environment, such as lifting foreign direct investment restrictions in a range of sectors and the promises of a predictable tax regime have all sent positive signals and created optimism. Members can view the report here.
According to UK businesses, the reform that will make the most significant improvement to the operating environment in India is India’s proposed Goods and Services Tax (GST). This would greatly simplify India’s tax and duty regime, replacing individual regimes in each of India’s 29 states with a unified arrangement. In effect, making India a single market. Read our full report here.
The Indian Government recognise that these reforms are a work in progress. In another boost for improving India’s business environment, the Indian government last Tuesday eased FDI norms in 15 major sectors, including mining, defence, construction, real estate, retail, civil aviation and broadcasting.
This welcomed further liberalisation coupled with the better business environment that will undoubtedly follow — means that now is the time for British business to seize the India opportunity with both hands.