News: UK missing India growth ride?

(DNA 23/06/2006) London - The UK is missing the boat in the race to invest in India says a report by the trade and industry select committee published on Thursday. The report argues that the UK is wasting its “unique relationship” with India and lagging behind other nations.

The select committee made up of members of parliament feels UK firms have a limited understanding of the growing Indian economy and see India as just a source of cheap labour rather than as an emerging market.

“Levels of interest in the Indian economy are growing year upon year - but UK investors don’t yet really understand the opportunities that India presents,” said Committee chairman Peter Luff.

However, the Confederation of British Industry (CBI) feels the report has been too harsh on UK firms. “The report is too much of an exaggeration, a lot has already been done, but yes certainly a lot more needs to be done too and it is good that the government has recognised that we need to step up the game,” said Andy Scott, director of international and UK operations at the CBI.

The report criticises investors for only looking at India in terms of call centres and BPO providers, and hence remaining oblivious to its real potential.

“There are a lot more opportunities besides IT and BPOs, and UK is well placed to engage in these, but greater awareness is required,” admitted Scott.

“The CBI is already doing a fair bit with our partners in FICCI and CII, and we are now looking to see if we need a ground presence in India too,” Scott told DNA. CBI so far has only three offices outside of the UK - Washington, Brussels and Beijing - but is considering setting up an office in New Delhi or Mumbai to make more out of the economic boom.

Scott also blamed the UK department of trade and industry that has focussed on inward investment in the last year as opposed to outward.

The British Chambers of Commerce shared Scott’s view and argued that British exporters were not getting much help from the government. “They have seen export support reduced in recent years as the Treasury switched its focus to encouraging inward investment,” said BCC director general David Frost.

Mohit Sarobar, resident director of the Confederation of Indian Industry in the UK, argued that British firms had an ‘out of focus view’ of India that needs to be changed. “Indian corruption is a major deterrent for UK companies, but they don’t realise that India is as large and as diverse as Europe, and therefore all Indian states are not the same,” Sarobar told DNA.

While Tony Blair has been talking about opportunities in India in the same breath as China over the last year, UK firms have all headed for China in larger numbers than to India. “China is getting saturated now, but also with the Chinese, you say what you want and you get it. That is not the case with India,” said Sarobar.

In India, he argued, governments because of the compulsions of a democracy did not take rapid decisions and hence the results were watered down. “Companies in the UK want CEOs to produce results and hence the CEOs take short-term decisions which will get them quick results. India needs to position itself in that manner,” said Sarobar.

Sarobar felt UK firms would find clearances much faster if they went to forward-looking states in India. He also blamed the British for not doing their homework. “The Japanese and Koreans are very good at doing their homework, and that is why India has seen huge investment from them, UK needs to learn from them.”