Corporate Britain has a blind spot about India — and it needs to wise up fast

David Cameron spoke of ‘enhancing’ Britain’s relationship with India during his recent visit to that country. He could have used the word ‘resurrecting’ in reference to Indo-UK relations. The two countries have spent the past four decades genially drifting apart, at both official and civil society levels. In some strategic areas there was and continues to be some friction. However, the past few years have seen a nascent, ‘third generation’ relationship emerge, one whose most tangible component is two-way private corporate activity. The Cameron visit cut the ribbon for this new bridge, quietly under construction the past several years.   

In the immediate post-colonial period, there was a strong overlap between the two countries. Britain served as a benchmark for the West, even modernity, for most Indians. London saw India and the Commonwealth as necessary to its status as a great power. The Suez Crisis and the economic slump of the 1970s led Britain to refocus its foreign policy on the US and, latterly, the European Union. During this same period, India alternated between the US and the Soviet Union for geopolitical leverage to handle its security problems with Pakistan and China.

This shift was starkly reflected in Britain’s immigration policy. The 1948 British Nationality Act allowed the right of residency in the UK to any Commonwealth citizen. By the time the 1971 Immigration Act was passed, Indian immigration had been restricted to a few avenues — mainly family reunion and studying. Indian immigration to the UK began to plummet. In 1981, 18,000 Indians emigrated to the UK. Fifteen years later the number was down to 4,600.

The economic relationship was similarly parsimonious. Both countries, imbued with the spirit of Fabian socialism, drove their economies downwards and their outlook inwards. Britain may have been India’s main trading partner for decades after Indian independence but the menu was sparse and the portions negligible.

In a thirty year period, running until the late 1990s, a generation of Indians and Britons grew up knowing each other almost solely through the Indian immigrants in the UK — including students — and the meeting of cricket teams. The primary cultural exchanges were romantic and unreal. The UK consumed large amounts of Raj literature, so-called ‘chutney fiction’. Indians read Enid Blyton and P.G. Wodehouse, idyllic works based on life in pre-war England.

This dry patch occurred at a time when there was a slow but steady growth of the US’s profile in India. By the 1990s, the US was the primary foreign destination of educated Indian immigrants. The Indian-American community has been exceptionally successful: it is now the wealthiest and best-educated ethnic group in the US. Their success and their association with the new technology sectors that have become icons of the ‘new India’ mean that for the present generation of Indians, the West is largely defined as America.

This era of disinterest has led to a younger generation in both countries who have no opinions or even much interest about the other country. A July Chatham House/YouGov poll showed that 87 per cent of Britons had no opinion, positive or negative, of India. A mirror image of this could be seen in a Times of India poll of urban Indians in May which found 60 per cent of Indians didn’t know Britain had just held a general election. If rural areas had been polled it would be safe to say the figure would have risen to above 90 per cent.

What these surveys do indicate is that the imperial hangover is buried, once and for all. When Prime Minister Manmohan Singh publicly admitted modern India’s debt to British colonial rule in a 2005 speech at Oxford University, even among the minority who noticed it he received as much support as criticism. His speechwriter told me then, ‘The prime minister wanted to acknowledge what was a simple truth and put it behind us.’ The May poll said less than nine per cent of Indians thought of Britain as ‘their former rulers’.

There was more meat in the economic relationship after India shifted to a higher rate of growth from the late 1980s onwards. But the numbers did not grow as fast as India’s trade with other countries. Britain, India’s third largest trading partner in 2000-01, had slipped to thirteenth place by 2009-10. Even in absolute terms, the figures fell. 

This partly resulted from changes in the British economy. Its areas of competitiveness shifted to high-end services like retail and finance — sectors where India still retains protectionist barriers.   

Yet there is evidence corporate Britain had developed a blind spot regarding the Indian market. It was only after Jaguar became Indian-owned that it opened showrooms in the subcontinent — well after every German-owned luxury marque had done so, including ‘Made-in-England’ but ‘Owned-by-Germany’ Bentley.

While the flow of Indian students to the UK remained strong, in part because foreign student tuitions are a key revenue source for the British university system, Britain has in recent years been eclipsed by the US and threatened by Australia as a studying destination. Such figures are difficult to compare, but most estimates say there are about 40,000 Indian students in Britain compared to some 35,000 in Australia and 100,000 in the US.

The greatest erosion in bilateral relations has been in the more hard-nosed facets of foreign policy. Strategic ties withered as India looked to powers that had influence in Asia while Britain concentrated on the North Atlantic. The two countries had cordial relations through the Cold War, not least because their spheres of interests barely coincided.

This lack of foreign policy interaction combined with the decades of disengagement contributed to a one-sided image of India even among a new set of British leaders. Many saw India through the prism of British developmental assistance and thus fixed on India’s poverty. Others were influenced by India’s repression of violent secessionist movements in Punjab and Kashmir, conflicts which reached their peak in the 1980s and early 1990s.   

This may have been one reason that led then Foreign Secretary Robin Cook to offer to mediate on Kashmir during his sole official visit to South Asia in 1997 and, some years later, David Miliband to write that solving the Kashmir dispute would remove one of the ‘main calls to arms’ for the sort of terrorist who carried out the Mumbai 26/11 attack.

Tony Blair was among the first Western rulers to believe it made sense to give India a broader multilateral role. He supported India’s desire for a permanent seat at the United Nations Security Council and invited India to the 2005 G8 summit in Gleneagles. Whatever goodwill this earned in New Delhi was largely lost during the Gordon Brown years which were marked by Miliband’s statements and bilateral bickering over Afghan policy.   

These incidents led India to recognize that the British Foreign Office no longer possessed any special intuition regarding South Asia. It also had no long-term India policy. London, Indian officials came to believe, was willing to rhetorically rub India the wrong way to win points with human rights lobbies or Muslim voters back home.

In contrast, US foreign policy had quickly become a fast learner in the art of tiptoing through the South Asian diplomatic minefield.  A senior US diplomat laughed after Cook’s statement, ‘How stupid! Everyone knows you never mention Kashmir on your first visit to South Asia’. Washington also worked out that the Indian leadership knew full well that without a Kashmir settlement it could say goodbye to its hopes for a seat at the global high table. New Delhi was agreeable to dialogue with Kashmir’s political leaders or the Pakistan government, but it could not be seen to be doing either as a consequence of foreign pressure.

It hasn’t helped that New Delhi has restricted its relations with the EU to the field of trade policy. As one of EU Foreign Minister Catherine Ashton’s senior aides complained recently, ‘India is the only major country that declines to engage with the EU in a strategic manner’. This denies the UK a potential role as a conduit between New Delhi and Brussels.   

Countries like Japan and Germany have followed the US lead in negotiating ambitious strategic and economic partnerships with India that dwarf anything London has planned. India now has formal partnerships with nearly 25 countries.   

‘We traditionally deferred to Britain when it came to India. Now we know it is a level playing ground here’, said one continental envoy to me once. Cameron was quick to acknowledge this, saying in India, ‘I know that Britain cannot rely on sentiment and shared history for a place in India’s future. Your country has the whole world beating a path to its door’. 

The present conflict in Afghanistan is a case study of how British and Indian strategic interests sail past each other. Britain desperately wishes to withdraw its troops from Afghanistan, but can only do so if it persuades the US to do the same. In New Delhi’s view, London is overly willing to make concessions to engage elements of the Taliban in negotiations; concessions that would in effect hand over Afghanistan to a remote control in Pakistan. New Delhi also believes, exaggeratedly, that London spends its time whispering in American ears about the pleasures of withdrawal and the lack of consequences.   

Indian policy is driven by a view that the previous Taliban regime in Afghanistan, at the behest of Pakistan’s military, aggravated and protracted the Kashmiri insurgency in the 1980s and 1990s. New Delhi also has its doubts that Pakistan, itself a terror target of one section of the Taliban, would not one day succumb to a new Taliban regime.

For much of the past five years India, whose offer of troops was turned down by the West in 2002, has pleaded and cajoled the US to avoid any policy that could allow the Taliban a foothold in Kabul. New Delhi has also warned of the Pakistan military’s policy of supporting some Taliban groups like the Haqqani network and urged that Islamabad be pressured harder on this point. 

Within the Indian foreign ministry, ‘the British school’ has come to mean advocates of a hasty Western withdrawal. The two sides found themselves on opposite sides at the London conference on Afghanistan and again at the recent follow-up conference in Kabul. At both conferences, the UK joined Pakistan In pushing for broad-based language as to who among the Taliban's ranks would be eligible for rehabilitation. India and countries like Russia successfully pushed for the Inclusion of ‘red lines’, ensuring certain hardcore Taliban leaders would be excluded from such a process. New Delhi did notice London was unable to sway Washington either — a key reason the red lines came to form paragraph 27 of the Kabul conference's final communique.

    This strategic gap may be closing as the Obama administration seems less convinced that US security can afford a withdrawal. British diplomats are no longer heard arguing that Pakistan’s dominant Sufi culture would be immune to Taliban blandishments. British officials say Indian views that it seeks to appease Pakistan are nonsensical, but they are nonetheless deeply entrenched in New Delhi. 

    One positive consequence of Cameron’s much-criticized comment about Pakistan, 'that we cannot tolerate in any sense this idea that the country is allowed to look both ways and is involved in promoting terror in any way in India, in Afghanistan or anywhere else in the world,' is that New Delhi is less inclined to place London and Islamabad in the same Afghan corner. New Delhi perceived It as a seamless part of a series of harsh statements warning Islamabad against cherry-picking among Taliban groups that were being Issued at the time from various levels of the Obama administration.  

What Cameron’s visit did help to bring out were the green shoots of a new Indo-UK relationship. Indians have an ‘Anglo-Saxon bias’ in that their migrants, corporations and arguably government have shown a preference for nations whose political and legal systems claim descent from those of England, which speak English at least at the elite level and, preferably, play cricket. Indian immigrants have avoided even countries like Germany or regions like Scandinavia. Indian firms invest sparingly in China, Brazil or even Japan. The US has become the main beneficiary of this bias today. Australia and even Singapore have also done well from it.

In the past several years, Britain has developed an extremely sound investment relationship with India. Its well-developed finance sector has helped make Britain a dynamic technology hub. This, in combination with its culturally friendly regulatory and legal environment, have made Britain a major site of Indian corporate acquisitions.

While the mega-deals of the Tata Group — the purchase of Tetley Tea, Corus Steel and Jaguar Land Rover — have received the most attention, the real story of Indian buyouts in Britain has been the small technology firm. According to UK government figures, Indian firms by 2003-04 had acquired a total of 480 British firms of which 338 were in the information technology or telecommunications sector. Many of the remainder have been in pharmaceuticals or biotechnology.

The UK is the preferred regional base for Indian firms and over half of the 1,200 such firms are headquartered in the UK. Britain is now the fourth largest foreign investor in India. Over 70 Indian firms are listed on the London Stock Exchange. Tata’s $11bn purchase of Corus Steel was matched and beaten by Vodafone’s $12bn acquisition of telecom firm Hutchison Essar. At the heart of the new India is its private corporate sector, which has been more comfortable with Britain than any other country apart from the US. And this has arisen on the basis of cold commercial calculation with only the mildest evidence of nostalgia.

What has been missing over the past few decades has been an awareness of how much both countries have changed not merely from imperial times but even since the 1960s, culturally and economically. Young Indians from urban professional families are today more likely to watch English Premier League football than international test cricket. Indians are the biggest consumers of the wares of the BBC World Service and the British Council. Britain may be just another European country and India a largish Asian one, but it is evident that both sides are en route to making each other, to paraphrase Cameron, partners of choice in the coming decades.

Pramit Pal Chaudhuri, Foreign Editor of the Hindustan Times and Senior Associate of the Rhodium Group.