India-UK relations have reached a new high following India Prime Minister Narendra Modi’s visit to London last year, according to the recently-appointed High Commissioner of India to the UK H.E. Mr Navtej Sarna.
Mr Sarna who took up his position in London in January, replacing Ranjan Mathai, said, in an interview, following a private briefing with corporate members at Asia House: “Modi’s visit to the UK was a crucial visit which gave a fresh impetus and energy to UK-India relations and set out a clear roadmap.”
India’s economy is forecast by the Asian Development Bank (ADB) to grow 7.4 per cent in 2016 and by the International Monetary Fund (IMF) to grow at 7.5 per cent. The IMF’s latest Regional Economic Outlook for Asia and the Pacific describes India as the “fastest-growing large economy in the world.”
A cautious fiscal policy and much lower inflation in India of five per cent – thanks to the drop in crude oil prices – have helped the world’s largest democracy and Asia’s third largest economy remain on a fast growth trajectory. In November 2013, before Mr Modi entered office, inflation had reached an all-time high of 11.16 per cent. The Government is now on course to meet this year’s fiscal deficit target of 3.9 per cent.
Mr Sarna took up his new post in London following an illustrious career in the Indian Foreign Service which included being Indian Ambassador to the State of Israel and Official Spokesperson, Ministry of External Affairs.
So what does he hope to achieve during his tenure as High Commissioner to the UK? The 58-year-old responded: “The agenda has been set by the Prime Minister’s visit last year and that is that we have to deepen and give a more strategic significance to the relationship [between the UK and India] which is already very good, develop closer political engagement, increase trade and investment links and work on sectors that are already doing quite well like education, tourism, defence, security and counter-terrorism. So the purpose would be to push ahead on all these fronts.”
Despite the relationship between the two nations being at an all-time high, perfectly encapsulated in Mr Modi’s appearance at Wembley Stadium alongside British Prime Minister David Cameron in November 2015 when both country’s national anthems were played to a British Asian audience, UK-India trade has in fact decreased by 9.39 per cent in 2014-2015 compared to 2013-2014; foreign direct investment (FDI) from the UK into India has dropped from US$7.8 billion in 2011-2012 to US$1.4 billion in 2014-2015 and the UK’s share in India’s global trade has gone down from 2.07 per cent in 2013-2014 to 1.89 per cent in 2014-2015.
But Mr Sarna was unfazed and upbeat. “These things are cyclical and depend upon various economic conditions but we have to keep our eyes on the broader trend,” he said, sipping a cup of tea inside Asia House. “Despite various ups and downs, the UK is the third largest inward investor in India and India is the UK’s third largest source of FDI and there is a huge corporate history of the UK working in India. Some companies have been there for decades and Indian companies are doing extremely well in the UK. Indian businesses in Britain have created 110,000 jobs in the UK,” he pointed out.
India undertook 122 FDI projects in 2014-15 in the UK, accounting for over 9,000 new jobs. The UK attracts more Indian investments than the rest of the EU altogether and the value of Indian FDI into the UK has increased from £164 million in 2004 to £1.9 billion in 2013.
Indeed, a recent report, India meets Britain 2016: Tracking the UK’s top Indian companies, published by Grant Thornton UK LLP in association with the Confederation of Indian Industry (CII), revealed that 2015 saw investments from India in the UK rise by 65 per cent, making it the third-largest source of FDI in the UK. The report stated there are more than 800 Indian companies in the UK .
Of these 800 Indian businesses, 62 companies have experienced growth of 10 per cent or more. These 62 fastest growing companies have a combined turnover of £26 billion, spread across diverse sectors, predominantly telecoms, pharmaceuticals, financial services, automotive and industrial products.
The report, which monitors fast-growth Indian businesses operating in the UK, showed that the combined turnover of these businesses had increased by £4 billion in 2015, up from £22 billion in 2014 to £26 billion in 2015 and that they pay a combined UK corporate tax of almost £650 million, up from £500 million last year.
When asked about whether there was some malaise on the ground in India away from the high growth rate figures, Mr Sarna responded: “You can always find a problem if you are looking for one but I think overall India’s growth story is very optimistic and our international institutions have shown that India is a bright spot in a rather gloomy landscape and that is what Arun Jaitley stated in his budget this year.”
During his UK trip Prime Minister Modi spoke about the importance of bilateral cooperation in education and research. Following his visit, 2016 was named the UK-India Year of Education and Research. 25,000 UK students are set to visit India as part of the Generation UK-India programme and 10,000 British people will travel to India to intern with Tata Consultancy Services.
“The first interns have already gone out there so the process has already started in terms of people-to-people contact in education,” Mr Sarna said.
Piyush Goyal, the Minister of State with Independent Charge for Power, Coal, New and Renewable Energy in the Government of India, was in London recently. Mr Sarna spoke about the trip, saying: “He met with interlocutors and the Government and investors and put forward an energy roadmap for India. He put a strong emphasis on renewable energies and technologies in this field and shared his plans for developing the sector, predominantly with solar power and providing electric cars in India.”
He added: “There is tremendous potential for UK companies in renewable energies as well as to come and participate in Make in India, defence, telecoms, pharmaceuticals, the automobile industry and food processing.”
Nevertheless the Goods and Services Tax (GST) remains an important reform in India which has been held up by political deadlock in Indian Parliament as the ruling BJP party does not have enough seats in the Upper House and so the Bill is being blocked by opposition parties. This 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. Mr Sarna was optimistic it will get through Parliament eventually.
“This tax will help businesses as it will create a single national market, create efficiency and is expected to add to GDP growth,” Mr Sarna said.
“It’s an important reform,” Mr Sarna said, “which the Government of India is committed to and it will get passed at the opportune moment. It brings about a certain predictability and uniformity and will encourage foreign investors.”
There has been FDI liberalisation in a host of sectors such as insurance, defence and multi-brand retail in recent years. How much interest have UK companies shown in these sectors?
“It’s our role to encourage more FDI from the UK. The percentage of FDI in critical sectors has increased. India is today the world’s top FDI investment for greenfield development. The market in 2015 was worth US$63 billion,” Mr Sarna said.
“UK companies have shown a lot of interest. Some companies are already well-established and some are taking a first look at India and we hope that through constant engagement with forums like Asia House and other forums we can create that awareness of the positives of investing in India,” he said.
Mr Sarna also spoke about the strong financial links between India and the UK and the Rupee-denominated bonds being issued in UK markets, which demonstrate long-term investor confidence in India’s growth.
In March the International Finance Corporation (IFC) issued two billion rupees, nearly US$30 million, in 15-year Masala bonds, which were listed on the London Stock Exchange, he pointed out. These became the longest-dated offshore rupee bonds to be issued. The proceeds of the bonds will be invested in private sector development in India.
The Indian Railways Finance Corporation (IRFC), the public sector enterprise that raises funds for the Indian Railways, also plans to issue Masala bonds on the London Stock Exchange to raise investment for Indian railways infrastructure, he said.
When asked whether the High Commission of India in the UK wanted the British Government to reinstate the Post-Study Work Visa, which had allowed Indian students to work for up to two years after completing a degree in Britain, but was discontinued in 2012 despote despite protests from Indians, he said: “If it was up to me I would reinstate it.” Indian students can now only work in the UK for up to four months after they complete their studies before having to convert to another visa if they wish to remain.
“We are very engaged with our interlocutors to see how we can help to create the right conditions whereby more and more students from India come to the UK. There has been a 50 per cent drop in students from India to British universities in the last three to four years and I would like to see the trend reversed,” he said.
Apart from being a senior diplomat, Mr Sarna is also the author of several novels and has appeared at the Jaipur Literature Festival. “I can’t find time to write now but I certainly hope that at some stage I get back to writing a novel. I have a very full day here in London,” he said, before he had to rush off for his next appointment.
The High Commissioner to India Navtej Sarna, left, fields questions from Asia House corporate members at a private briefing held at Asia House. Pictured on his right is Chief Executive of Asia House Michael Lawrence, who chaired the discussion.
The interview with Mr Sarna took place following a private briefing and roundtable discussion with Asia House corporate members. Corporate members represented at the table included Arup, Barclays, Anglo-American, HSBC, Standard Chartered, Rio Tinto, McKinsey & Company, Shell International, Amec Foster Wheeler, GSK and Amarchand.