Reality check | David Cameron’s India visit

The British PM used all the negotiation skills in his arsenal to build camaraderie with Indian authorities

Ideologically, you are free to disagree with Gujarat Chief Minister Narendra Modi on many key issues. However, when it comes to business acumen, you have to be with him on the same page. India has a huge potential as an emerging market. Is this what attracts British Prime Minister David Cameron to India? Certainly, it is. Cameron has arrived to try to win new business in the face of fierce global competition, even as a scandal engulfs an Anglo-Italian helicopter deal. This is his second visit to India since he became Prime Minister of the UK in 2010. The British premier’s trip comes days after a similar trade mission by French President Francois Hollande, underlining how Europe's debt-stricken states are competing to tap into one of the world's fastest-growing economies.

 

In an interview to The Hindustan Times, he said: “I’m in no doubt that India is going to be one of the great success stories of this century … And I want Britain to be one of your partners as you grow and succeed”.  Cameron's delegation, which includes representatives of over 100 companies, cultural and educational bodies, is the biggest taken abroad by a British prime minister and includes four ministers and nine lawmakers.

Cameron used all the negotiation skills in his arsenal and also made the right of noises on the Jallianwala Bagh massacre in order to build camaraderie with Indian authorities. The savvy PM urged India to have a relook at the Eurofighter jet deal even while the AugustaWestland chopper scandal loomed in the backdrop.

Business Standard updates the visitor's agenda with status report at the end of his visit 

Trade: The British PM said he wanted his country's companies to help India develop new cities and districts along a 1,000 km corridor between Mumbai and Bangalore, generating investment projects worth up to $25 billion. The visitor said he wanted British firms to work with the Indian and British governments to develop nine districts to link Mumbai, India's financial capital, with Bangalore, its tech hub.

United Kingdom investors are now looking at Gujarat with far more interest than earlier. James Bevan, the UK high commissioner, had actively participated in the 'Vibrant Gujarat' meet with a large business delegation. There, he had said Britain and Gujarat were "natural partners" and he expected more and more Gujarati investment to Britain. Recently, the European Union (EU) lifted its 10-year ban on Modi visiting any member-country, imposed after the 2002 anti-Muslim riots.

 

India is among the top five investors in Britain with over 700 Indian companies having set up shop there. Total investments from the UK into India are $28 billion. These predominantly came through Castrol, Cairns, HSBC, BP, Vodafone and Stanchart. India has emerged as a major investor in Britain, with companies from here having invested $19.9 bn there. Bilateral trade was $16.25 bn in 2011-12, up from $12.7 bn in 2010-2011 and $10.7 bn 2009-2010. Both sides have agreed to double the trade by 2015.

 

India has a double taxation avoidance agreement with the UK since January 1993 and a bilateral investment promotion and protection agreement since 1995. There is also the British government’s decision to phase out the financial aid it gives to India by 2015, expected to shift to only technical assistance.

Status Report | Two-way merchandise trade between India and UK grew by an average 23% in 2010-2011 but the present fiscal has been quite turbulent with India’s exports to UK falling by the month. However, officials from both sides reiterated during Prime Minister David Cameron’s visit that both countries are ‘on track’ to doubling trade by 2015 from $16.52 billion in 2011-12.

Bilateral trade in goods has been on the decline since the beginning of this fiscal, and the issue was raised by Minister of Commerce and Industry Anand Sharma during his meeting with Lord Stephen Green, UK’s minister of state for trade and investment last month. India’s export to UK stood at $8.92 billion and $8.15 billion in 2011 and 2012 respectively while imports stood at $7.47 billion and $6.72 billion. UK is India's third largest trading partner in the European Union and the 16th largest in the world
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Defence deals:  He will use this trip to persuade the New Delhi government to buy more than 100 Eurofighter jets after the French President left empty-handed this week. But observers feel Cameron will have to tread warily following the Indian decision to cancel the $750m (£483m) deal to buy 12 helicopters for VIPs from Agusta Westland, the Anglo-Italian group, after Italian investigators alleged that the parent company, Finmeccanica, had paid bribes, reports the The Telegraph, London. Political pundits say the PM will point out that Britain has in place tough anti-bribery legislation. 

 

Britain will try to strike defence, energy and education deals with the emerging superpower.

Status Report | Cameron’s visit saw the revival of talks to buy Eurofighter Typhoon, the next generation of jet fighters made by BAE Systems Plc, even as authorities in New Delhi continue talks to buy 126 Dassault Aviation SA Rafale planes from France. It seems India is also keen to give a relook at the deal. So while on one hand, Cameron was successful in reigniting India’s interest in Eurofighters, Prime Minister Singh asked Britain to help India in probing the scandal surrounding the purchase of helicopters made by AugustaWestland, an Anglo-Italian company, whose parent firm is Finmeccanica.

Cameron insisted that Finmeccanica is an Italian company. The visit, however, saw an important step being taken by both sides in launching negotiations for having an agreement in civilian nuclear cooperation.
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Visa issue: In an interview with the HT, the Prime Minister signalled that he will make changes in the application system that make it quicker and cheaper for Indians to come into Britain on business.Britain already runs the largest visa operation in the world in India, processing over 400,000 visa applications a year and granting 9 out of 10 applicants a visa, Cameron said. But he said that the visa system for Indians could be overhauled and streamlined.

 

According to The Telegraph London, new immigration rules have also led to steep fall in the number of Indians paying to study in Britain, and university leaders have complained that the rules are undermining the higher education sector.

Status Report | This has become a contentious issue for both countries. Time and again India has raised the issue of UK’s strict visa regime.

During his three-day visit to India, Cameron gave an assurance that visa rules would be relaxed for businessmen and students, and that there would be no limit on the number of students wanting to pursue studies in UK but it will be based on their merit
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Vodafone & Tesco: These two vexed issues will certainly dominate his meeting with Indian authorities. Vodafone has been entangled in a row with authorities here since it acquired Hutchison Whampoa’s mobile telephony business in India for $10.7 billion in 2007. According to the government, Vodafone should pay tax of Rs 14,000 crore on the acquisition. The dispute added another aspect last week when it was served a notice by Indian tax authorities over a transfer pricing issue related to the sale of shares of Vodafone’s India subsidiary to a Mauritius-based firm. The British telecom firm has decided to challenge this.

 

The PM is also expected to take up the issue of British retail giant Tesco, eagerly waiting to enter the multi-brand retail sector here. It recently decided to set up an Indian subsidiary to buy fresh and processed foods for its global stores. In 2008, the company also entered into a separate franchise agreement with Trent, retail arm of the Tata Group.

Status Report | Both issues were raised during the visit. On Vodafone, it was decided that the matter would be sorted out “soon and amicably”. Recently, finance minister P Chidambaram had said that the matter would be considered by the Cabinet Committee on Economic Affairs. It now remains to be seen how the imbroglio, which is going on since 2007 and involves the British telecom major’s acquisition of Hutchison Whampoa’s Indian telecom business, will be resolved. Indian authorities claim that due to this deal Vodafone is facing a tax liability of Rs 11,200 crore. 

 

On Tesco it seems the ball has started rolling. It is now only a matter of time when the British retail giant enters India with a series of multi-brand retail stores. The move could help Tesco build back-end operations which will be handy when it enters the country.  It is reported that the retailer has been in talks with the Tatas to set the ball rolling on its India plans and Mumbai and Bangalore could be likely cities for its India debut.

(This is an updated version af an earlier article)