Like the British Prime Minister, Boris Johnson has chosen India, which he visits this week, for his first official overseas trip as Mayor of London. In doing so, they have both identified a common cause - harnessing an Aspiration Nation. If you believe that demography determines destiny, then India, with more than half its population under the age of 25 years, is the ultimate place to capture the benefits of scale, consumption growth and capital formation on a magnitude unrivalled in human history. That will make India, along with China and the US, one of the key engines of global growth in the coming decades.
Yet if Britain wants to pursue the India opportunity, then, as the Mayor and PM have identified, it must reach out to India more confidently and aggressively. Like any attractive bride, India is being courted actively by multiple suitors. The next generation of Indians – the children of independent India - don’t share the same historical and emotional ties to Britain. This generation is looking to the US.
The UK needs to get inside the psyche of young and modern India. It can do so by identifying shared interests that address the most pressing challenges for India and match them with the biggest strengths of the UK. There are six target areas that span the breadth of soft and hard power which, I believe, meet this criteria. They are education and skills; infrastructure; financial services; retail and consumer sectors; creative industries; and defence.
For millions of Indians, education is seen as the way out of poverty. Indian parents spend USD 13.5 billion annually in educating their children abroad. The UK visa regime permitting, British universities have a unique opportunity to attract more students from India as well as set up campuses in India under proposed legislation. The UK Government should take some bold steps such as granting overseas students an automatic right to work in Britain for three years after graduation and enable British companies to recruit fresh graduates directly from Indian universities and train them in the UK. Government policy should not be driven by short term immigration targets, or concerns about displacing jobs, but focus instead on creating long-term shared prosperity built across generations. In effect, bona fide students and trainees should simply be removed from the immigration numbers. The impact on the sentiment of Young India will be deep.
Beyond Higher Education, there will be a huge thirst for vocational skills from the 270 million Indians entering the workforce over the next 20 years. India needs a skilled workforce that is measurable and mobile if it is to retain an edge over China as a value-added manufacturer: Britain benefits from globally recognized training standards and qualifications. Tata’s investment in British steel and car manufacturing, which now make the Indian conglomerate the largest industrial employer in the UK, is powerful recognition of British manufacturing technical skills and training.
As well as building human capital, India also has ambitious plans to invest USD 1 trillion on physical infrastructure over the next five years, including power, roads, railways and ports and airports to support the inexorable urbanisation of India. The capacity to deliver on this scale of investment depends crucially on forging public-private partnerships and accessing innovative financing. British architects, transport consultants, civil engineers, contractors, equipment manufactures and project financiers now have an opportunity to build large swathes of 21st century India, just as an earlier generation did in the 19th century.
Completing the trio of human and physical capital is, of course, financial. With a common language and legal structures, and favourable timezone, the City of London remains the obvious gateway for Indian companies wanting to access global financial markets. There are already two Indian companies in the FTSE 100, Vedanta and Essar Energy, and 22 companies listed on AIM. Unlike China, which is a growing exporter of capital requiring an offshore renminbi centre, India will continue to require inward investment flows.
India’s recent burst of reform has finally permitted majority investment in multi-brand retailing, a brave political decision that will reshape an archaic retail sector, and create jobs. Companies such as Tesco already source over USD 500 million of goods from India, supporting competitive prices to UK consumers – now they have the prospect of selling directly, and competitively, to Indian consumers and, in the process, transform the country’s notoriously inefficient supply chains.
Hand in hand with mass consumerism of the retail sector are India’s vibrant cultural industries spanning Bollywood, literature and cricket. The UK and India enjoy the rare accomplishment of genuine innovation through collaboration in the creative sector. Consider, for example, the role of British publishers in bringing to the world the award winning work of authors such as Vikram Seth and Arundathi Roy.
Despite Britain’s disappointment over the recent award of a multi-billion Indian jet-fighter contract to a rival consortium, defence remains a ‘hard’ and historic area of immense bilateral collaboration. India’s defence budget, already at USD 40 billion, is one of the fastest growing in the world. With foreign suppliers required to plough back at least 30% of the contract value into India as offsets, there is fertile ground for more UK-India defense partnerships – particularly those which provide genuine technology transfer.
As Boris Johnson will discover this week, the opportunity set in India is large and significant. Yet the promise of India is not new, nor for the faint hearted: erratic policy-making of the type that snow-balled into a wall of critical commentary following the retroactive tax ruling on Vodafone was proof that India rarely moves in a straight line. For the business leaders accompanying the Mayor, then, the picture portrayed over the next few days may owe much to Bollywood - plenty of drama, intrigue and emotions before reaching a happy ending. But aspiration always wins out.
The writer is Senior Managing Director of Blackstone and is accompanying Boris Johnson on his current trade mission to India