Warm but awaiting new direction

Warm but awaiting new direction
Warm but awaiting new direction

India's relations with the UK are deep and friendly. But the much expected impetus to closer ties will have to wait till clarity emerges on London's divorce with Brussels. The rhetoric remains as warm as ever. But the visit of British Prime Minister Theresa May to India in early November, her first official visit as British leader outside Europe, did little to take the relationship forward from an apparent post-Brexit pause that has puzzled most analysts and foreign policy experts. Stressing the importance of free trade, May said Britain would remain a passionate advocate of greater trade and closer economic cooperation with all its partners including India. “Countries that don't embrace opportunities stagnate. Free trade creates a rising tide that lifts all boats. It makes us all richer. It creates jobs,” she said shortly before leaving for India. Hard line stance unchanged Analysts on both the UK and India are questioning the route she has chosen. In the context of Indo-British ties, they have reservations about the timing of the announcement - just three days prior to her visit to India - of fresh visa restrictions on overseas students including new two-tier visas that place a premium on the quality of the courses the students wish to pursue in Britain. The government also announced fresh restrictions on the issue of work visas to control immigration. “The U.K. will consider further improvements to out visa regime if at the same time we can step up the speed and volume of returns of Indians with no right to remain in the UK,” she said. That is obviously not what her Indian interlocutors wanted to hear but she seemed oblivious to the fact that her reluctance to ease the strict visa restrictions on students, professionals and visitors from India will make it difficult for the Modi government to proceed with any meaningful trade deal since any concessions to Britain would become politically contentious. Out of the script But the script wasn't supposed to unfold like this. There was euphoria in the immediate aftermath of Brexit about an imminent upsurge in trade ties between India and the United Kingdom and even the early completion of a free trade agreement about the two countries. That feeling has now been tempered and May's choice of New Delhi as her first foreign stop outside Europe - seen as a harbinger of closer economic and strategic ties - is now being dismissed as a false dawn. Key partnership Despite the disappointment following May's visit, analysts are unanimous that bilateral ties between the two countries are far too important - and deep - to suffer any long-term or irreparable damage even if they pass through a transitory indifferent phase. Two MoUs were signed on improving the ease of doing business and on intellectual property rights in the presence of the two prime ministers but that was poor takings from a visit that had promised much more, given the potential. India and Britain remain important trade and strategic partners. India is the third largest foreign investor in the UK and Indian-owned companies from the largest bloc of employers in that country's manufacturing sector. And the Tata Group, which owns such marquee British assets as Jaguar Land Rover, Tata Steel Europe and Tetley Tea, among several others, is the single largest employer in the UK. Britain is among India's most important sources of technology, armaments and FDI. And London is, arguably, the most important international financial centre for Indian companies looking to raise money, including through rupee-denominated (masala) bonds. Post-Brexit euphoria subsides There was optimism both in the UK and India that its exit from the European Union would prompt the British government to sign a Free Trade Agreement with India, and a few other countries, and also ease entry rules for Indian students, professionals and other individuals. The hopes have been belied. Not only has Britain not made entry easier for Indians, it has moved in the opposite direction. Unanswered questions Over the last few years, the UK has tightened visa rules for Indians. Since she took office as Home Secretary in the Cameron government, the number of Indian students in the UK has fallen from 40,000 to about 25,000. During this time, the number of Chinese students in the UK has jumped almost 60 per cent from 55,000 to 90,000. A massive increase in visa fees, a strict clampdown on issuing work permits to Indian students who complete their higher education in the UK and tougher norms for people to visit family members settled in Britain are the main causes for this decline. Since taking office in 2014, Indian Commerce Minister Nirmala Sitharaman and other functionaries of the Indian government have taken up this issue with their counterparts in London but the UK government has shown no signs of relenting on the matter. May did not indicate that she was thinking of any ways of addressing Indian concerns. Instead, her assertions on stepping “up the speed and volume of returns of Indians with no right to remain in the UK” point to a continuation of the hard line approach she had adopted in her previous role as Home Secretary in the David Cameron government. Wait and watch mode Prime Minister Narendra Modi and May inaugurated the India-UK Tech Summit in New Delhi on November 7, which will provide a platform for the two countries to explore further cooperation in entrepreneurship, technology, innovation and IPRs. And British International Development Secretary Priti Patel's had promised help for the Prime Minister's ambitious Smart Cities initiative. But despite this, there is a feeling in India Inc that the India-UK relationship has entered a wait and watch mode. Billions at stake, no clarity on future Indian companies such as the Tatas, Birlas, Essar, Infosys and others have invested billions of dollars in the UK not only to gain a foothold in that country but also to serve the European Union market from their British bases. Following Brexit, their plans of serving the Continental market from across the English Channel have been thrown into disarray. Clarity will emerge only when the roadmap and the fineprint for Britain's exit from the EU become clear. Till then, senior India Inc executives say, Indian companies aren't likely to embark on big-ticket investments in Britain unless a really attractive deal - involving a company with marquee brands or really high technology - comes along. Reassuring British voters Interestingly, May's delegation did not include any representatives of Big Business. The official line was that the two countries want to focus on cooperation in the MSME space, which form the backbone of both economies and which generates the maximum employment in India. There is no doubt that for Modi's ambitious Make in India initiative to succeed, India's fragmented and mostly uncompetitive MSME segment has to pull itself up to global standards and become part of the international value chain. And collaboration with British industry is one way of achieving this goal. But there is a school of sceptics in New Delhi who believe the absence of Big Business in May's delegation is simply a pointer to the fact that she can't cut any trade deal with India till she navigates the UK out of the EU. So, this school of thought goes, British Big Business is not really interested in expanding their footprint in India (and elsewhere) till they are clear about where they stand vis-a-vis the EU in the aftermath of Brexit. May's visit, the sceptics say, was really about convincing British citizens and Conservative voters that the UK can do just fine without the EU. So, moves that reassure MSME stakeholders - owners, employees, suppliers and financiers - would suit the Tories better than a trade deal. Given that this could facilitate job creation in India - a key BJP election promise - no one in New Delhi was complaining. Pointer to the potential Analysts are unanimous that India's ties with the UK will remain warm and stable. May's visit was keenly watched as it was considered a test case on the direction she will take as the UK forges ahead with its relationships with major economies in the post-Brexit phase. There are significant areas of cooperation that the two sides broadly agree they should pursue. Defence equipment, strategic affairs, counter-terrorism, climate change, renewable energy and science and technology are the obvious sectors of collaboration. These are being pursued and this will continue. There could even be several small and large breakthroughs in these fields. They will be pointers to the great prospects of the India-UK relationship. But the full potential will unfold only when there is clarity on the fine print of the UK's divorce settlement with the EU. For now, to use a cricketing parlance, the match is on halt due to a rain-induced break. It has not been abandoned. Not by a long shot.

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