“Britain has lost an empire and has not yet found a role.” — Former US Secretary of State Dean Acheson, 1962.
Margaret Thatcher, John Major, Tony Blair and Gordon Brown failed to rebut him. Can David Cameron, the new Prime Minister of Britain, be able to help Britain get an image makeover? Cameron during his maiden visit to India made it clear that Britain wanted to establish its strong presence through the dynamic economies of Asia.
Disillusioned by the ‘special relationship’ with the US and the overtly bureaucratic European Union (EU), Britain has subtly revamped its foreign policy. After India, Cameron is scheduled to visit China in November this year and William Hague, the UK Foreign Secretary who has already been to China and Japan, has written to all the employees of his office to make the best use of the country’s extensive diplomatic network.
Political:
From the moment he became the resident of 10 Downing Street, Cameron stressed a ‘special relationship’ with India. His ‘frank’ comments about Pakistan exporting terrorism and that it should do more to “crack down on and eliminate” terrorists, earned praise from Indian officials who had been lukewarm in their response to the staid Labour government led by Gordon Brown.
Britain, one of the five permanent members of the United Nations Security Council, has been backing India’s claim for a permanent membership.
Economic:
According to several indicators, while the diplomatic relations between India and Britain have been cordial, from the British perspective, there were ground level gaps on the economic front.
India dominates in sectors like financial services, retail and education. Jo Jones, a Tory MP from Orpington, commented, “Market access to India in these areas that are important to Britain is still not very easy.” Eyeing these sectors to help in the acceleration of economic growth back home, Cameron requested India to further open up these sectors to the mutual benefit of both countries. At present, India allows 51% FDI in the single brand retail sector, but multi-brand retailing is still a closed sector for foreign investment. The FDI from Britain to India has fallen steadily in the last five years. In 2007-08, it was INR 4,690 crore out of INR 9,8664 crore that declined in 2009-10, to INR 3,094 crore out total of INR123,378 crore.
On the trade front, India is in an advantageous position. According to the latest report released by UK Trade and Investment, India is the fourth largest investor in the UK, ahead of Germany and China and behind only the US, Japan and France. Britain, on the other, has fallen from being the third to the thirteenth largest trade partner of India. According to Keith Vaz, Labour MP from East Leicester-shire, “India today is so powerful that it does not need to count UK anymore but the UK cannot do business outside EU without India.”
While Britain’s market might not be big, India will benefit from stronger economic ties with Britain as it will help in quicker realisation of the Free Trade Agreement with the huge EU market. India and EU have at present a GBP50 billion a year two-way trade. In his media address, Cameron stressed Britain’s strengths: “We have access to European markets. We have a highly trained workforce and as I have said, we are one of the most open and welcoming economies.”
Britain also sought India’s help to get over the sovereign debt crisis. The economic recovery in Britain has been rather sluggish in the post-meltdown period. Faced with the spiralling fiscal deficit, the UK government has resorted to massive austerity measures. Its economy grew by just 1.1% in the second quarter of 2010 after clocking 0.3% expansion in the previous three months.
In the energy sector, India can reap the benefit of buying offshore stakes of BP in Vietnam.
Defence:
India will benefit by the 700-million pound (about ` 5,500 crore) military deal to acquire 57 additional Hawk advanced jet trainers for the Indian Air Force and Navy, in two separate contracts. This means getting access to the higher and sophisticated technology in which Britain excels. Cameron said, “We have a very strong defence industry and I am delighted to see the BAE-HAL agreement. I think we bring lots of expertise we can share with you.”
Education:
Prior to Cameron’s visit, education was thought to be the bone of contention between the two countries as the British government had decided to put a cap on the non-EU immi-gration of skilled labour. While Valerie Vaz, a Labour MP, argued that Britain must encourage more doctors from India to work in Britain’s national health services, there was no concrete discussion on the issue. This was overshadowed in noise over issues like the return of the Kohinoor. The only comment made on skilled labour was by the British Business Secretary Vince Cable who said that the coalition partners of the ruling regime in Britain had agreed to form a pact on immigration outside the EU, but it would not hamper investments from India.
Indian students are a majour source of revenue for the British government just as degrees from famous British colleges are of value to Indian students. This understanding was evident in Cameron’s statement to the press, “I think we have some of the best universities of the world and I have brought 14 Vice-Chancellors with me. We have one of the strongest science bases in the world and we brought institutions like Welcome Trust with us.” The two sides agreed to launch a new phase of the UK-India Education and Research Initiative. But there was no promise to reduce the amount in the education bond that the Indian students will have to pay before going there to study.
The three-day visit was not about overnight changes in bilateral relations. What Cameron did was to try and transform a “cordial” relation-ship into a “better, highly fruitful” one. Time, as usual, will be the performance evaluator.
Copyright@Business Economics August 1 page no 8-9
