UK well placed to expand ties with India post-Brexit, says British High Commissioner

The UK is well placed to expand its bilateral trade and investment with India in the light of the UK’s dramatic decision to leave the European Union (EU), the British High Commissioner to India Sir Dominic Asquith KCMG has said.

Speaking in an interview with Asia House, Sir Dominic, who had only been in the role three months, said: “it was too early to say “ what impact Brexit [the decision of the British public to exit the EU] has had in India.

But he said: “There is a clear recognition that the ties between the UK and India predate the EU. They are firm, they are long-standing.”

He said Brexit provided both “opportunities and uncertainties” and it gave a platform of importance to the relevance of India to the UK and the UK to India across a whole spectrum of sectors, many of which are of real macro-economic importance to India.

He pointed out that British companies were already involved in every sector in India whether it was the City of London raising capital for projects in India, defence, aerospace, urban regeneration [referred to India as smart cities], technology or energy.

So is the UK likely to explore a bilateral FTA (free trade agreement) with India in the light of Brexit?

India has been negotiating an FTA (officially known as a Bilateral Trade and Investment Agreement) with the EU since 2007 but talks stalled in 2013.

“I can’t comment on an FTA between India and the UK but clearly opportunities are there to develop trade and investment opportunities both ways,” Sir Dominic said. “Not just because of the past relationship but there are many aspects about the UK which make it very attractive in terms of stability, transparency of regulations, the political and economic environment and the culture and customisation of companies in India that deal with Britain,” he added.

“When CEOs are polled about what is attractive about the UK, access to EU markets is somewhere in 10th place so this is a helpful reminder that there are many other more important aspects of operating in the UK so I assume that will continue. If you look at the ambitions that India has in terms of economic growth and infrastructure development, whether the UK is in or out of the EU, we are equally well placed to respond to those and develop those,” Sir Dominic continued.

In the interview, which was held after a private briefing with Asia House corporate members, Sir Dominic said there was “increased optimism” that the Goods and Services Tax (GST) would get through Indian Parliament in the Monsoon session which starts on 18 July. The proposed uniform tax will be levied on goods and services across the country replacing layers of state and Centre taxes.

“It will clearly be a benefit to the Indian economy as well as to UK companies operating in India and it will be most welcome. There seems to be a growing recognition in the Upper House that it is desirable to pass GST,” Sir Dominic explained.

The tax is expected to boost India’s GDP by around one to two per cent and create a level playing field between local players and foreign companies, as well as to create efficiency in the supply chain. The bill was cleared by the Lok Sabha (Lower House) in May 2015 but held up in the Raja Sabha (Upper House) where the ruling National Democratic Alliance (NDA) does not have a majority.

Sir Dominic took his role up in March 2016 having retired from the Crown Service in 2013 and joined the private sector. So why did he return to diplomatic life two years later and why to India?

“I had always been interested in India. I had not had a professional background there but had always visited as a tourist. It is a hugely important country and I had been interested in going there five years ago when instead I was sent to Cairo [to be Ambassador to Egypt] and then Libya [to be Ambassador to Libya] but when I was asked to do this job I decided to accept. I would say it is the most interesting job in the Foreign Office and right now is the most interesting time to do it after Narendra Modi’s election when India looks to be changing so I decided this was an opportunity and challenge I could not resist.

So what are his goals in the position?

“The relationship [between India and the UK] is very close for good historical reasons as well as for business reasons and cultural reasons, but we have to look at it, through a slightly different prism, by accentuating the relevance that the UK and India have to each other today and in the future and to be really enthusiastic about developing a strategic partnership with each other, so it’s about framing the context, mindset and environment in which we deal with each other.”

He said the key strands of UK-India relations were business, defence, security, cultural and people-to-people which were all “interconnected.”

Sir Dominic said it was important to demonstrate that it was not “just important and fun” dealing with each other but that each side could demonstrate real outcomes.

Despite the relationship being close, particularly following Modi’s visit to the UK in 2015, UK-India trade had decreased by 9.39 per cent in 2014-2015 compared to 2013-2014; foreign direct investment (FDI) from the UK into India dropped from US$7.8 billion in 2011-2012 to US$1.4 billion in 2014-2015 nd the UK’s share in India’s global trade went down from 2.07 per cent in 2013-2014 to 1.89 per cent in 2014-2015.

But Sir Dominic, like his counterpart the High Commissioner of India to the UK H.E. Mr Navtej Sarna, remained unfazed and upbeat.

“Of all the G20 countries, the UK is still the biggest investor in India and has been since the beginning of the century. British companies are responsible for one in 20 jobs in the private organised sector in India and our exports outperform France, Italy and Germany. We are very well positioned today with India and we need to work from that basis. India is the third largest investor in the UK. For example 30 per cent of the medicines in the UK come from India. The largest manufacturer in the UK is Indian. My aim is to build exports and build investments. When Modi was over here in November last year, more than £9 billion of deals were announced and no Government money was involved in that – it was all private sector deals,” he said.

As for whether the British Government is prepared to reinstate the Post-Study Work Visa, which was discontinued in 2012, he said: “There are a lot of myths about aspects of our visa regime, whether for professionals or students. The number of students coming from India to the top universities in the UK is increasing.”

He said the numbers from India had only dropped off for colleges of further educations which reflected the ambiguity of the status of these colleges and he said that the UK was still attracting the best and brightest students from India.

“If after completing their studies they are employed at a graduate level profession on a graduate level salary then they are most welcome. That is how it should be. If you are going to come here from other countries and study then it’s important that afterwards you do a job commensurate with that study either here – or even better back in India using the experience you have developed here,” he said.

From April 6 this year new rules were implemented stating that nationals from outside the EU living and working in Britain on a Tier 2 skilled worker visa must earn at least £35k to settle here after living here five years. Earlier the settlement salary threshold was £21k. There are concerns the new rules may affect Indian IT professionals in the UK. “Many Indian skilled workers were coming here who were not being paid a salary that we considered to be a competitive market salary so we implemented this to advance the ability of people in Britain to compete in that market at that salary level,” Sir Dominic explained.

“It’s much too early to have an opinion on Brexit and whether this will lead to more visas for Indians. The key point is that we welcome those who want to contribute towards the British economy through the application of skills that are required here,” he said.

So what is Sir Dominic’s impression of Modi, who recently celebrated two years in office?

“He has introduced a large number of reforms – and there are many more he has in mind which will contribute to the continued growth of the Indian economy. He has great ambitions for India and wants to work with those who will contribute positively to help him achieve these ambitions. I strongly believe the UK needs to continue to collaborate with India closely,” Sir Dominic said.

Sir Dominic pointed out that Modi had initiated many flagship projects such as Startup India, Digital India and Make in India which offered opportunities to British companies. There are also opportunities in infrastructure – particularly in project management and design, as well as Modi’s planned smart cities, which Sir Dominic said were actually “urban regeneration projects.”

The UK has agreed to develop three smart cities in Amaravathi, Indore and Pune.

Sir Dominic said that Britain was very well positioned to assist with these, particularly with transport, waterfront and riverfront development and especially with technology. “We are closely involved with the relevant authorities. I have just come back from Andhra Pradesh where I met the chief minister about Amaravati,” he said.

But he said it was important that smart city projects were “bankable and investable” to attract UK companies.

“They are hugely ambitious plans,” he said. Some are receiving state funding and others will have to rely on PPP (public-private partnership) processes and raising capital in foreign markets.

“That’s an area where the UK should focus its efforts more – working with the Indian Government on how to raise capital from the City of London,” he said,

He said there were great opportunities for British companies in defence too. Forty nice per cent of FDI is allowed in the defence sector in India. India is still a big defence importer but it now developing its own defence manufacturing industry.

“As India grows its defence industry we should be collaborating and looking at how we can share some of our experience as we also went from being a government-owned to privately owned defence industry,” he said.

Private healthcare also poses a huge opportunity for British companies, especially the associated technology to provide healthcare to a population that is very dispersed.

The energy sector, notably oil, gas and renewables, also offer big opportunities to British companies, for example making India’s grid system energy efficient, he said.

“These are some of the areas where we have the capabilities and the expertise, so we need to get more involved and also develop new ways of financing these projects so for example via green finance and clean renewable energy bonds,” he said, “ and look at how we can use the City of London as a platform for doing that.”

Nevertheless he admitted there were concerns about the Indian Government’s intention to renegotiate the India-U.K. bilateral investment treaty (BIT), signed in 1994.“Businesses would be concerned if there was less protection under a renegotiated treaty,” he said.

He said there was a great demand for chartered surveyors, actuaries and accountants in India now, as India was keen to move up the World Bank Ease of Doing Business rankings.

“The Indian Government is very focused on pushing itself up that league and it’s moving up slowly and it is introducing various measures that it will push it up like the introduction of bankruptcy laws but they recognise they need to increase their capacity on professional services so having chartered accountants, actuaries and surveyors is a key area,” he said. “They are keen for people from the UK to come and work in India. I was in Hyderabad last week and the state government is very interested in establishing an institute for actuaries and the Royal Institution of Chartered Surveyors is already engaged with India and has been for some time. The British Government has been engaged very closely in this.”

As for the unexpected announcement by Raghuram Rajan, the Governor of the Reserve Bank of India (RBI), that he will step down in September, Sir Dominic said: “He did a very good job as Governor of the RBI. He is a well renowned figure who instilled confidence in the RBI. The various successors being talked about are all extremely capable. I assume they will continue to pursue Rajan’s responsible policy of fiscal management.”

He also spoke about how federalism was becoming more prominent in India as the Modi-led Government has increased the percentage of the budget that is dedicated to states.

He said the NDA Government had introduced “cooperative federalism” which was being manifested in the quite intense competition between states to present themselves as attractive investment targets for foreign companies. “That is an important thing to keep an eye on and recognise that in India you deal with the Union Government and the state governments,” he said.

Before the interview Sir Dominic gave a briefing to Asia House corporate members about the current political and economic landscape in India. Corporate members represented at the table included GSK, Arup, G3, Rio Tinto, KPMG, DWF, Shell International and NATS.

naomi.canton@asiahouse.co.uk

Asia House has launched a series of programmes to tackle the extraordinary shift in the economic and political landscape post-Brexit. To see which events we have programmed click here. To read an overview of the series click here.

To read an interview with the High Commissioner of India to the UK H.E. Mr Navtej Sarna click here.