Channel: Editor's View Point

  • Dear Mr. Cameron, what is the significance of an enhanced relationship with India?
    By Sanmit Ahuja On July 06, 2010

    Where are the opportunities?
    All is not lost and India is only just starting out its growth journey and there are still plenty of opportunities for UK companies to benefit from this phenomenal growth. But in order to capture these, the UK must focus its energies on a few sectors that are not only of strategic importance to India but also where its companies and industry have core competencies.
    1. Infrastructure
    India’s need for infrastructure development is absolutely staggering and it could use all the help it needs. According to recent figures by major investment banks and Indian Government, the country must invest USD 1.7 trillion over the next decade if it needs to sustain its growth rates.
    The country needs infrastructure technology, process knowhow, PPP framework development and the necessary finance for project development. The UK has arguably the best PPP knowhow in the world, but yet the breakthrough its companies have had in India in this sector is better not spoken about. UK has had fair bit of engagement with the Federal Government in Delhi but a more targeted engagement with the State Governments will yield far better results.
    2. Science and Innovation
    India has a huge talent pool but is lacking in a strong innovation eco-system. The country has recognised the need to develop intellectual property related business and has announced setting up of 14 innovation universities in addition to the established Indian Institutes of Technologies.
    The UK has huge expertise in the areas of knowledge/technology transfer, commercialization of IP and funding innovation. Although there have been attempts made by establishing programmes such as the UK India Education Research Initiative (UKIERI), these have mostly established academia-academia linkages. The real need is to develop academia-industry and industry-industry linkages in the areas related to innovation.

    3. Energy and climate change
    There is a huge shortage of energy in India. The Government does realise that it must do all it can to fulfil this power shortage and has put huge faith in renewable energy sources. But it will face challenges in creating subsidies for such projects. The UK has a major opportunity in the energy sector in India in both conventional sources as well as renewable sources.
    In conventional sources the UK can offer India the expertise in clean coal technologies. The other area where the UK still has an opportunity is nuclear sector despite the head-start that other nations have. In renewable energy sectors, the most significant role that UK can play is to provide Indian industry the knowhow on financing of renewable projects and to the Government PPP frameworks that will bring price of renewable energy close to grid-parity. The transmission and distribution segments also have a huge need for advancement. UK can bring in smart-grid applications and knowhow into the Indian market.
    4. Education
    This is probably the opportunity of a lifetime as India plans to allow foreign universities and educational establishments to operate within the country. It is estimated that the Indian education sector will be worth £35bn in the next five years. Big opportunities are there for UK education specialists to address the skills gap in India. Areas such as Executive Education, establishing vocational courses, training the trainers as well as establishment of new universities should of particular target.
    5. Healthcare
    With growing affluence and large scale urban migration the need for more modern healthcare facilities is massive. The market is estimated to reach £50bn in size by the year 2013. The biggest opportunity will be in form of developing of medical infrastructure such as hospitals and diagnostic centres. India is also preparing to establish large number of medical institutions. There are opportunities in related sectors such as developing models for distributed health-systems, health insurance, general well-being, telemedicine in addition to the already known drugs and pharmaceuticals sector.
    6. Other Sectors
    Other sectors that also offer major opportunities for UK industry are advanced engineering, defence & security, media & creative industries and sports.

    7. What about Retail, Banking, Insurance, Legal, Other Financial & Professional Services?
    Yes, it is true that these sectors have formed the bedrock of the UK economy. But the fact is that there is a regulatory barrier to entry for international firms in these sectors. Although the regulatory framework for these sectors is being addressed but it will not be easy for the Indian Government to liberalise these sectors overnight. The focus of the UK Government in supporting these sectors must be discussed in a separate platform perhaps under the aegis of JETCO.
    How will you deliver the enhanced relationship?
    In your strategy to enhance this relationship, your Government must define absolute, real and achievable targets. There is no reason why Britain could not redress the balance in its favour. Some very simple but hard hitting targets can provide significant improvement in quality of economic linkage with India.
    The most important and fundamental change that is required to improve Indo-UK economic ties is the establishment of a better engagement model. This model must be simple with clear and tangible objectives.
    1.Define an overarching framework
    Now that you have publicly declared the interest to better engage with India, you must also define the over-arching strategy on how the UK will do so.

    The tangible goals could include:
    • Improve the quality of exports basket. The share of high value goods must be increased by at least 25% in the next 3 years
    • Reduce the trade deficit with India to within 5% by 2012.
    • Develop a comprehensive framework to double education and infrastructure related exports to India
    • Increase royalty related income streams from India by 500%.
    • Select one or two projects of national importance to India and provide resources for delivery of those projects.
    • Increased engagement at the State Government level. Select 5 progressive and forward looking states.

    2.Horses for courses
    Different sectors in India require different collaboration efforts. There are sectors where 100% FDI is allowed such as infrastructure, technology, energy but they need capital and technical knowhow. Others such as those within banking and financial services are less open to foreign investment and require continuous lobbying.

    The strategy for these sectors will be very different and should not be attempted from within the same outfit as it will send the wrong signals.  You should look to create three specialist groups that will implement your strategic vision for India. These groups should report to the same Executive Board. These groups are:

    • Group 1:  that looks at improving quality and share of trade (to look at removing trade barriers and remove information deficit)
    • Group 2: that will collaborate with Indian Government to deliver one or two projects within the high priority sectors – infrastructure, healthcare, education, science & innovation and energy.
    • Group 3: that addresses the needs of industry sectors that are faced with regulatory barriers – financial services, legal services, retail, insurance, defence. Perhaps JETCO should only look at this area. 

    3.Demonstrate commitment 
    You have shown the intent to engage with India but will also have to show commitment by creating extra resources for the market in particular the high priority sectors. In the last few years DfID budgets in India have been more than £250mn. If UKTI gets an additional £25mn which is only 10% of the annual DfiD budget then it would do wonders.

    4.Delivering the Strategy
    The additional budget that you create must be spent with great care and extreme precision.

    Some possible targets are:

    • Create three centres of excellence in the areas of Infrastructure, Environment and Science & Innovation. These centres will liaise with all key stakeholders in India. The centres will specialise  in knowledge transfer and additionally create commercial opportunities for British companies.
    • Set up four biannual events alternating between India and the UK. These events will focus on other specialist sectors - Healthcare, Advanced Engineering, New Media, Creative Industries and will bring UK and Indian SMEs together in other high priority sectors.
    • Set up a Higher Education advancement wing in various parts of India that will identify opportunities for British universities as well as those working in the academic sectors.
    • Increase technical assistance budget but direct that to dedicated workshops with State Governments.

    The Government should only seed fund these centres and other initiatives. The balance should come from the private sector. That will push the managers to make the initiatives self-sustaining.

    You may feel that creating even a £25mn budget during the cost cutting drive may be quite a challenge, but investing this money at targeted areas will enable UK industry to win hundreds of millions of pound of contracts in the high growth Indian market.

    Also, the investment that you make can be very easily recovered in a matter of months given the size and volume of the Indian market.

    5.Increase Outbound traffic
    Inward investment is good for any nation. But this figure is prone to sharp reductions in the case of world economic slowdown as we have seen already. It is important that British companies are able to secure projects in other high growth markets since it will strengthen the linkages with that market.

    6.Bring foreign policy in line with the economic policy.
    Understand that India also has global ambitions. Its companies have started to make big the moves into Africa. There are very clear synergies that the UK has given its exposure to the African market. Some roads from India to Africa should go through the UK. You should explore the creation of a Britain-Africa-India (BrAfIn) Forum.

    7.More Skilled Personnel
    Bring in frontline staff, not just honorary advisers, who know India just as well as the UK. There are many you will find from within the diaspora in the UK. Add an additional qualification of those who understand and support globalisation.

    8.Do not forget to spread the message back-home
    Whilst it is important to show visible presence on the ground in India, it is equally important to communicate to and to educate the UK industry on the importance of this enhanced  relationship.

    9.Facilitate where UK cannot play the instrumental role
    India also has numerous other needs such as poverty reduction, development of microfinance frameworks, distributed energy systems, rural healthcare, tackling illiteracy. The Indian Government has recognised the need for inclusive growth and is putting in place various policy measures to deliver on these areas.

    The UK, through DfID, is already a significant donor, but it should now also look to facilitate the Indian Government in finding international best practices and other social entrepreneurs that are willing to invest in these areas. Engaging social entrepreneurs will not only help make the system sustainable but also progressively reduce the need for the aid that the UK has been providing to the under-privileged in India. There are a fair number of social entrepreneurs particularly in the diaspora community.  The facilitator role should be played through institutions such as the Chatham House and London School of Economics who have done some very good work in these areas.

    10.Engage with Indian industry nearer to home
    There are over 700 Indian companies in the UK. You should also take their inputs on a regular basis as the business heads of those organisations based here in the UK will also be instrumental in helping Britain engage with India.

    The Future
    The future for India-UK economic relationship is extremely positive.

    The UK must set up the right engagement models that are appropriate for the Indian market. It should certainly shy away from rhetoric and concentrate more hands on support and advice.

    If it is able to do both then the countries will benefit from a very synergistic alliance and grow on the back of each other. UK can provide the technical assistance, technology transfer and innovative financing techniques for nation building projects in India.

    In my mind there are four individuals in your cabinet, in addition to yourself, who will be instrumental in making this happen. These are The Rt. Hon. George Osborne (Chancellor), The Rt. Hon. Vince Cable (BIS Secretary), The Rt. Hon. William Hague (Foreign Secretary) and The Rt. Hon. Chris Huhne (Energy and Climate Change Secretary).

    I hope that you will agree with my analysis and suggestions.

    I wish you all the very best for the trip to India this month and will watch out for key messages coming out of the visit.


    Yours Sincerely

    Sanmit Ahuja
    Chief Editor.


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