David Cameron’s decision to make his first major overseas visit as leader to India is the right one. There is certainly huge enthusiasm in the Conservative Parliamentary Party for the development of a closer relationship with this rapidly changing part of our old empire. We often talk of the special relationship with the States, but given our shared history, heritage and language, our relationship with India could – and should – be every bit as special. It is a puzzle, given our head start and the presence there of several large British companies, that the rest of the world seems to have woken up to the opportunities in India much more quickly.
India’s miracle may be economic, but its consequences will also be political. The next political generation will take it for granted that there are three superpowers in the world – the USA, China and India. So David Cameron’s objective should be to lay the foundations for the development of a strong and enduring strategic partnership between the world’s oldest and largest parliamentary democracies that recognises the enormous economic and political opportunities for both nations.
There are, though, still huge challenges facing India. On my last visit in March this year I saw a new confidence in the business sector, almost bordering on complacency, that its relentless growth will continue. This outcome is not quite inevitable. At least four factors could frustrate those ambitions – appalling infrastructure, environmental degradation, economic inequality and political instability. The UK, with its expertise in the first two of these areas, is well placed to help and advise.
Despite the sensitivities of the old colonial masters telling India what is best for it, we are also, through DfID, doing something to help India deal with a society where more people live on less than a dollar a day than in the whole of Africa. More British advice on agricultural reform and help with storage and logistics would be welcome, though, in a country where horrifying amounts of food never reach the market.
India will have to work out its political problems for itself, though. Its coalition governments are not best placed to take the bold decisions necessary to respond to globalisation and a rapidly changing world.
Two other enduring problems remain but are currently looking more manageable – Hindu/Muslim tensions and Kashmir. The strong and mature response of India to the recent terrorist outrage in Bombay gives grounds for hope that community relations are strengthening, while, despite some real challenges, the dialogue with Pakistan on the disputed territory continues.
It is economic developments that currently take centre stage, then. India’s economy is the fourth largest in the World with the second largest population, of 1.1 billion and sustained growth rates of around 8 or 9 per cent. Awareness of the strength of the Indian economy has grown sharply in recent months, but, as the Trade and Industry select committee concluded in its recent report, the UK’s understanding of what is happening in India is still only partial. Too many British people still see India as a threat to UK jobs from outsourcing, particularly from call centres. In fact call centres are a tiny part of the Indian economy – the true scale of business process outsourcing goes far beyond call centres and makes an enormous contribution to the international competitiveness of many British firms.
And anyhow India is about far more than IT. There is significant growth in manufacturing industry of considerable quality – especially in the pharmaceutical, automotive and aerospace sectors and there are vast opportunities for the UK’s higher education sector. The bureaucracy associated with the "Licence Raj" still generates delay, frustration and opportunities for corruption, but doing business in India is getting easier all the time. The select committee reached three broad conclusions. First, that the UK is not as engaged with India’s markets as it should be and second, that the Indian market is liberalising at a rate not always fully appreciated in the UK. Our third conclusion was, "…that the UK’s institutional arrangements to support trade with and investment both in and from India are characterised by enthusiasm but also by confusion. A great deal of good work is being done, but by too many overlapping bodies with ill-defined responsibilities, and often inadequate resources. Viewed from India, the UK is a small country, and our efforts need to be far more focussed to have a real impact."
There can be no doubt that the Indian government would like a still more vigorous relationship with the UK. For example, frustration is often expressed on the Indian side that trade talks have to be conducted through the EU. Meanwhile too many British public sector bodies are trying to be seen to be involved in India, leading to some confusion and even irritation on the Indian side.
David Cameron must build strong relationships with this coming superpower and think carefully how British interests can best be protected and promoted before others have taken our place.