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India-U.K. trade: a success story with rough edges

The growth of India-U.K. trade relations is claimed by both sides to be one of the biggest success stories to come out of India’s post-liberalisation phase. But running alongside is a less-publicised story of disagreements and frustrations. There is a sense that domestic politics, both in London and New Delhi, often spoils the show.

First a few feel-good headline statistics that are routinely cited to underline the strength of Indo-British economic ties: Britain has emerged India’s fourth largest trading partner globally, and the second largest in Europe with trade in goods and services running into the region of £8.7 billion; Indian companies are the second largest investors in Britain, after America; some 500 Indian companies, mostly in the IT sector, have offices in Britain; and Britain has become the third largest investor in India since liberalisation began in 1991.

While the momentum is set to grow with Britain seeking new emerging markets in India and, at the same time, desperately trying to woo Indian capital to Britain through a range of incentives, it is not all “tickety-boo,” as one Indian business source put it.

There is a sense in Indian trade circles that in a number of areas, critical to bilateral relations, the British attitude is protectionist. While Britain wants a near carte-blanche in terms of access to Indian markets and services, it is said to be less willing to reciprocate.

One area of major concern is what the Indian side sees as hurdles to “movement” of Indian professionals and business executives to Britain. British visa rules are “not conducive to free movement of professionals,” says a document prepared by the Confederation of Indian Industries (CII) listing a host of issues clouding India-U.K. trade relations.

And there are fears that things would get even more difficult when Britain’s new points-based immigration system aimed at limiting entry only to highly-skilled workers, comes into force on February 29. Proposed changes to visa rules also include reducing the duration of tourist visa and creation of specific business and specialist visas.

The CII believes that these measures are not helpful. Or as its document puts it bluntly: “As India and the U.K. seek to increase their mutual engagement, these measures are bound to be counter-productive to this endeavour.”

Indian business circles are concerned that with only days to go for the new system to come into force, there is still no clarity on several key issues even though these have been raised repeatedly with the British side both formally and at informal levels.

“We also flagged our concerns during discussions with the Immigration Minister Liam Byrne when he visited India recently, and consultations are going on,” said the CII’s U.K. spokesperson Ratika Jain.

At a time when there is so much stress on globalisation and India is under pressure to open up its markets to western investment, the new immigration regime is seen as bad news in Indian business quarters.

One source called it “regressive” and said that if Indian concerns were not addressed it would have adverse impact on Indian investment in Britain.

Of particular concern is the move to introduce quotas for non-European Union employers for them to bring in foreign workers.

“For companies who are looking to expand their presence, this is not conducive. This is especially so when a number of Indian companies are looking at expanding their operations to the EU while setting up their base in the U.K.,” the CII says.

Indian businesses want to know on what basis these quotas would be calculated, and insist that an organisation’s future staff needs should be taken into account while deciding the quotas.

“New roles are being created as organisations expand and this should be taken into account,” officials say arguing that individual needs and the track record of employers should be the main criterion rather than imposing a one-size-fits-all model on everyone.

Another sticking point is the Indian industry’s demand for integrating U.K. visas with the Schengen visa. The argument is that employees of U.K.-based Indian companies have to travel frequently to other European countries, often at short notice, but as Britain is not a member of the Schengen visa regime, they need to apply for separate visas causing delays and disruption.

“For companies based in the U.K. but doing a lot of business with the EU, this is not conducive,” officials say pointing out that this would also help Indian tourists who contributed £139 million to British economy in 2006, outstripping Japanese, hitherto the biggest spenders.

Indians have also been pressing for mutual recognition of professional degrees so that lawyers, accountants and doctors from India can work in Britain and vice-versa. They are particularly keen on Britain opening up its accountancy and auditing services to Indian accountants.

At present Indian qualifications in accountancy are not recognised in Britain on the ground that they don’t meet international standards, though New Delhi insists that Indian standards are “rigorous” enough. Indian accountancy professionals wishing to work in Britain must obtain a local degree but, it is alleged, that even U.K.-trained Indian accountants face discrimination and “lose out to local practitioners.”

A joint India-U.K. task force, set up by the Ministry of Commerce, is looking at the possibility of the two countries reaching a Mutual Recognition Agreement of professional degrees. But, given the current mood in Britain with focus on protecting local jobs and interests of home-grown talent, there is much speculation whether it would be in a hurry to oblige New Delhi over issues that involve opening up the British market to foreigners — even if they happen to be much-sought-after Indian businessmen.

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