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Osborne in India
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Fri, 30 Jul 10

Osborne in India

Stephanie Flanders | 09:23 UK time, Wednesday, 28 July 2010

Mumbai: It rains a lot in Mumbai in July. Sheets of rain. Frequently, and without notice. I'm here with the chancellor's delegation and no-one has brought an umbrella. It goes with the general theme of the trip: go with the flow.

There will be no lectures, no talk of poverty, or human rights - just business, pure and simple. Except, business with India is never simple, as George Osborne is discovering.

Strip away all the happy talk about a new special relationship and there is a hard commercial logic to the government's Indian charm offensive this week. You will be bored by me saying it, but for George Osborne's deficit and growth plans to work - in other words, for his entire economic strategy to work - UK firms are going to have to export a lot more to the rest of the world in the next few years, ideally to the parts of the world that are taking off.

His favourite fact is that Britain now sells more to Ireland than they do to Brazil, Russia, India and China combined.

How much can this trip do to change that? Well, Mr Osborne may be right that we start from a stronger position here than we do with Brazil, say - or Russia. There are plenty of ties between the two countries, and they're not all historical.

One of his first stops in Mumbai on Tuesday was Bombay House - the 80-year-old headquarters of Tata Industries. It has probably bought more British-made goods in the past few years than any other company in the world. Alas, not in the form of exports.

As a result of buying Tetley, Corus, Jaguar Land Rover and the rest, Tata is now the single largest manufacturer in the UK. But, with some exceptions, British firms have found it harder to go the other way - perhaps because the sectors they excel in, like retailing and financial services, are the parts of the Indian economy that are still most closed to foreign companies.

Our exports have not kept up with India's tremendous growth. We used to be India's fourth largest source of imports; now we're around 18th.

I asked R Gopalakrishnan, the Executive Director of Tata, whether there was a chance that UK retailers and bankers could get a better foothold in India. He was surprisingly honest: there were indeed barriers to the Indian market for any foreign company in these industries, and those barriers were not disappearing any time soon.

He said he thought the British were pinning too much on services as a way of paying their way in the world. We should get back to our "special skills", in engineering and infrastructure; and those were certainly skills that India was going to need.

As it happens, Mr Osborne also says he wants Britain to get away from what he calls the business model of the past 10 years, where, among other things, the UK put too many of its eggs in the financial sector basket. But you can't help noticing that all the UK businessmen with him for this part of the trip are from the world of finance: the likes of Peter Sands, of Standard Chartered, and Xavier Rolet of the London Stock Exchange.

Then again, you deal with the hand you've been dealt. And this week people here say that one of the most constructive contributions that Mr Osborne could make to British business interests is to lobby senior Indian officials to support legislation currently bogged down in parliament, which would raise the cap on foreign investment in an Indian insurance company from 26% to 49%. Of course, a key beneficiary would be Standard Chartered.

George Osborne with Vodafone phoneMr Osborne's other big public event on Tuesday was launching a new solar-powered phone at a Vodafone shop in downtown Mumbai. He says he chose Vodafone because it demonstrates what British companies can do in India where there is free competition. Since buying an Indian telecoms company in 2007 the company has become the country's number two mobile provider, with over 100 million subscribers.

But Vodafone is also reaching a crucial time in a highly public dispute over $2.6bn in taxes which the Indian tax authorities insist are due to them as a result of that 2007 deal. A Mumbai judge will start to hear evidence from both sides next week. Rightly or wrongly, many at the event saw Mr Osborne's presence as a calculated show of support.

However you look at it, he and his fellow ministers are here banging the drum for British business - something which they say the last government didn't do enough. The message of this week is that the old-fashioned trade mission is back (though I don't remember the trade missions of yesteryear featuring Olympic runners and senior officials at the British Museum).

But, awkwardly enough, the Conservatives also fought the last election on the view that Labour had permitted too much immigration. Their plan to cap the number of immigrants to the UK from countries like India isn't going down well here at all.

"There's a Jekyll and Hyde quality to our dealings with the UK which pre-dates this government", one very senior Indian executive who spends a lot of his time in Britain told me.

"When it's the man in charge of getting you to invest in Britain, it's all smiles. But when you're talking to the official in charge of letting your people into the country, it's a whole other story." This man fears the new cap on the number of migrants from outside the EU will hurt relations, even if most big companies can still - eventually - get the people they need.

It's a small issue, in the broader scheme of things. But it goes to a larger point. Mr Cameron and his colleagues say a mature relationship with India will be a game of give and take. That's what this visit is all about. But when you look at what the rest of the world has to offer this new economic powerhouse, you have to wonder whether Britain needs more from India than our new government is willing - or able - to give it in return

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