Richard Heald: CEO’s December newsletter
Updates on a busy November and future prospects for the UK-India relationship
I was driving across the North Dorset countryside early on the morning of Saturday, 5th November listening to the Today programme when an article was aired previewing the forthcoming trade visit of Prime Minister Theresa May to India which was due to commence the next morning. It was a profoundly depressing and negative piece.
UK media coverage continued in this vein throughout her visit. The theme has picked up and replayed in the press since then. This is sad as, in large part, it ignores the significant successes that did occur and measures that have been rolled out since.
The UK India Business Council attended the excellent DIT-organised Tech Summit 2016 where the Prime Minister made the keynote speech alongside Prime Minister Modi, where the UK was partner country and where UK industry and academia showcased its’ technologies and where good connects and business took place.
The UK India Business Council also supported both a Joint Economic Trade Committee meeting between Secretary of State the Rt Hon Liam Fox and Minister Nirmala Sitharaman as well as the annual meeting of the India UK CEO Forum. The next day, my Chair, Rt. Hon Patricia Hewitt and I met privately, along with Carolyn Fairburn of the CBI, with Finance Minister Jaitley and then with Minister Sitharaman. And Patricia participated in the Prabodhan programme while I travelled to the Perkins factory opening in Aurangabad on the Wednesday and subsequently engaged in several separate meetings with UK and Indian businesses in Delhi, Mumbai, and Bangalore.
Patricia and my conclusions on the visit based on our attendance at the public events and private conversations with senior UK and Indian Ministers and business leaders was different than that which has appeared in the general media.
The clear message we received was that the two Prime Ministers developed a rapport in a bilateral session which over ran by some 50 minutes. This is not surprising since Prime Minister Modi and Prime Minister May have more in common than meets the eye with a shared focus on domestic security and border issues etc as well as on matters of personal faith.
“True”, there were no “fireworks” but the unofficial “mood music” was equally good from both sides and, in the scheme of things, an understanding on each principal’s points of view is sometimes more important. And the common anecdote, told to general mirth on both sides, was that the extended meeting delayed the official luncheon such that those attending consumed all the bread-sticks and more had to be obtained when the Prime Ministers arrived.
At the same time, the debate around Visa’s was much more nuanced than appeared in the press. Of course, the Prime Minister made her announced of improving the VISA process for key Indian investors in the UK. Media focus was on the stark divergence of public messages by Secretary of State Fox and Minister Sitharaman at the JETCO Plenary session and separately by Niti Aayog CEO, Amitabh Kant during a plenary session at the Tech Summit. However, private conversations to which we were party with Ministers there was a more relaxed attitude with one senior minister commenting that this was less of a “hurdle and more of an issue”. Indeed, comments by both Prime Minister May and Secretary of State Fox which appeared on the front page of Economic Times, stating that flexibility was entirely possible post Brexit went unreported in the UK
Moreover, we believe that the agreed bilateral discussions between the Secretary of State and Minister Sitharaman focusing as they do on trade policy will be an important key into setting the scene ahead of discussions on a broader comprehensive economic partnership agreement. Dr Fox’s recommendation that discussions start with an “audit “ of existing relations was warmly accepted by Minister Sitharaman.
And taking that theme further… the UK is playing great store in improving bilateral economic relations. Last Wednesday, the Chair and I had meetings separately with Secretary of State Fox and with Minister of State Greg Hands. We heard of positive initiatives that the Government is or intends to roll-out:-
- the new inclusion of “Overseas Direct Investment” within trade policy is a huge step towards developing finally a more “holistic” trade policy and something the UKIBC has been advocating for a few years;
- the Autumn Statement announced overall country and individual transaction limits for UK Export Finance for certain key markets – of which India is one – have been doubled; and,
- a “zany” initiative was outlined to us where ministers would make themselves available to business to assist pulling certain key transactions “over the line”. More details to be forthcoming but, hopefully, this welcome initiative will also lead to the demise of the dreaded “have you got any deliverables” call just before a Ministerial visit!
The change in ODI is relevant as colleagues and I attended the opening of the new Perkins facility in Aurangabad while we were in India. UKIBC had supported the Perkins team on this. This spanking new factory is generating earnings which are repatriated to the UK. It also has been used by Perkins to introduce/ test new processes, techniques and products which can be adapted and used back in the UK to the benefit of the operations at home. Plus, Chief Minister Fadnavis, who performed the opening, was clear that this facility was to be used as an exemplar of Make in India and Make in Maharashtra. And, ODI allows the UK to promote 2equally positive if “softer” economic arguments about UK industry in India being “good corporate citizens”.
While sitting in the Vivanta in Aurangabad on Tuesday, 8th November, the demonetisation announcement was released. I must confess, it took me some time to understand the complexities of the process. Nonetheless, the impact was instant in relation to the man in the street. Setting aside the controversy around execution which has been much reported…. and the inevitable political conspiracy theories. The underlying strategy is laudable and entirely in line with the ongoing Government policy to make transactions transparent. Look at demonetisation as an extension of the same transactional principles that underpin the new GST. It is remarkable that despite the undoubted inconveniences that have been suffered, the clear majority of the public are very supportive of the overall policy. Indeed, the ambitious ambition of India becoming a far more cashless economy is underscored by moves to introduce Aadhaar-enabled transactions. This coupled with a Niti Aayog inspired policy of creating a system of incentives/ disincentives so that cash transactions become relatively more expensive and that people are incentivised enough to pay digitally is radical in its vision and ambitious in its breadth. While there are/ will be a short-term impact in certain areas e.g. in real estate, consumer and FMCG sectors, the greater economic impact over time will outweigh short term issues. If there is anything which underscores the resilience and optimism of the Indian people it is this.
Finally, I think that it is worth concluding with some observations on the potential impact of the US Presidential elections which also broke while we were in India. The statements made by President-elect Trump while on the campaign trail indicated a certain direction of travel. Much will be clearer post late January. But initial comments by the nominated Commerce Secretary, Wilbur Ross (with whom I worked in New York while we were both at Rothschild), would indicate that a focus on what is termed “fair trade” versus “free trade”. This is something to watch very closely
As the year closes, we are indeed entering a very interesting phase in bilateral economic relations with India. The UK Government has set out its stall in terms of focus on improving and prioritising the dialogue and the UK India Business Council looks forward to playing its part while at the same time continuing to raise issues on behalf of our members and UK and Indian businesses in general.
On behalf of the UK India Business Council team in the UK and India, may I wish you, your partners, and families a very happy Festive Season as well as a healthy & prosperous 2017.