Prime Minister Theresa May, Chancellor of Exchequer Philip Hammond, Defence Secretary, Sir Michael Fallon, Secretary of State for International Trade Liam Fox and Business secretary, Greg Clarke have one thing in common apart from being important members of Her Majesty’s Government and Tories – they have all visited India over the past year in the hope of increasing trade between the two nations.
While the not without success in certain aspects of defence including confirmation late last year that BAE Systems, in partnership with Mahindra Defence, had won an order for 145 Howitzer artillery guns from the Indian Government, since the two earlier orders received in 2010 and 2020 in partnership with HAL, for Hawk jets to India, suffice to say that making headway in others areas of potential UK export trade has and continues to be an uphill struggle.
While the Indian economy is growing at around 7% annually it is disappointing that the level of bilateral trade between India and the UK has remained relatively flat over recent years. Indeed, over the past five years, according to a recent Financial Times article, trade between India and the UK declined from $15.7 billion to $14 billion. In respect of defence procurement by the Indian Government, purchases of equipment by the Indian Government from the UK fell from a figure of £966 million in 2010 to just £487 million in 2014. Defence sales in 2015 were put at just £34 million – I have yet to see a figure for 2016.
Clearly, there is work to be done not just in defence but in other manufacturing and service activities as well. Britain has a lot to offer India but deep down, the question is whether and if not, why not, India actually wants to trade more with the UK? We must of course ask ourselves whether we are doing enough work internally to support doing more business with India – whether the various trade and industry aspects of UK Government are working hard enough, whether they have sufficient people, funding and whether they are up for the task.
There is little doubt about the importance that the UK Government is placing on improving trade with India and this is nowhere better emphasised that by the number of individual ministerial visits that have taken place over the very short lifetime of the present Conservative government. But do we have all of our ducks in a row? Do we have a strategy and a plan and are we all talking from the same hymn-sheet? Are we listening to the customer and what he wants or just telling him what we can provide? Are we listening to concerns being addressed that from India’s point of view may be hostages to fortune? To these concerns I would have to add doubts as to whether the UK Government is supporting industry well enough and whether, if we really do want to succeed in selling more to India, we are funding the process sufficiently well? Finally, do we properly understand the culture of the market that we are trying to sell into or are we relying on what we perceive to be historic ties?
None of this is to ignore that Indian Prime Minister Narendra Modi’s ‘Make in India’ initiative which has as its primary goal encouraging multinational and domestic companies to manufacture their products in India with India based partners plays into this. Launched in late 2014 the initiative can already be considered a great success in India and a number of UK companies are also involved. BAE Systems has a long established partnership with Hindustan Aeronautics Limited (HAL) and the two companies have been working together on a joint development of the Advanced Hawk. That relationship goes back many decades and HAL is a perfect example of what can be achieved by two great companies working together in partnership.
The Advanced Hawk is a perfect demonstration of BAE System’s commitment to Make-in-India and as Alan Garwood, BAE Systems Group Business Development Director said recently, it presents a unique opportunity to build on a track record of collaboration with HAL. For the record, the BAE-HAL development includes a new, more powerful Rolls-Royce Adour 951 engine, a completely redesigned wing with active leading edge slats and updated ‘combat flaps, an all-new large area touch-screen display, digital head-up display (HUD), improved sensor simulation, full defensive aid suite, expanded weapons capability and fixed air-to-air refuelling probe.
Rolls-Royce has been in India for the best part of seventy years and the company also has a long history of collaboration with HAL that goes back well over fifty years. In addition and formed back in 2010 as International Aerospace Manufacturing, a jointly owned venture between Rolls-Royce and HAL, a new state-of-the-art facility was built at Bangalore to produce components for the Trent family of civil aero engines together with a number of other marine and energy gas turbines.
For all that and given that India is increasing its annual spend on defence at such a rapid rate, progress of UK companies achieving orders for defence equipment from the Indian Government has, since the initial Hawk aircraft sale was agreed in 2010, has been slow.
The reasons for this are probably manifold but I sense that unlike other countries that have succeeded in doing large scale defence business with India, it is the reluctance of the UK government in respect of doing government to government deals that may lie at its heart.
Another reason that has caused great irritation in India is the UK reluctance to give concessions on providing visas for Indian visitors including students who wish to attend UK universities, those wishing to come to the UK for other study purposes and migrants. While no-one is yet talking seriously about a post Brexit trade deal being achieved with India, unless this vexing issue is sorted out once and for all.
The other issue is that we need many of the highly skilled young people that may have been at University here in the UK to stay and help develop our own technology based sectors.
That no progress appears to have been made on the visa constraints given that Indian business leaders had made quite clear that the ‘single most important ‘open for business’ sign that Prime Minister Theresa May could have made after her visit to India last year would have been to announce that she would cut the £330 cost of a two-year visa to the UK to say £87 (this is the same rate that visitors to the UK from China currently pay) could have meant that those ministers who followed on the footsteps of the PM to visit India might have had a more successful outcome.
Meanwhile, Chancellor of the Exchequer, Philip Hammond appears to believe that reinvigorating economic ties with India can be best achieved by focussing on the UK’s ability to provide financial services to India. Personally, because there has as yet been little emphasis by the Indian government in respect of sophistication in respect of its financial services sectors, I am not that sure that the country is ready to be quite as responsive as Mr. Hammond might hope to UK service based industries such as banking, finance and insurance yet but we will see.
CHW (London 25th April 2017)
Howard Wheeldon FRAeS – Wheeldon Strategic Advisory Ltd.