Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Charles Walker (in the Chair)
Colleagues, I am afraid that an enormous number of hon. Members want to speak in this hour-and-a-half debate. Even if you limited yourself to six minutes each, it is unlikely that we will get everybody in. If you want to try to limit yourselves for the sake of other colleagues, that is fine.
Stephen Hammond (Wimbledon) (Con)
Good morning, Mr Walker. It is a pleasure to serve under your chairmanship. It is an honour to initiate this debate, and I am grateful to Mr Speaker for selecting it.
First, I declare an interest: I chair the Conservative parliamentary friends of India group and had the pleasure of travelling to India on official visits in 2009 and 2011, and I begin the debate in that light. I am an unashamed friend of India and believe in the need to strengthen, deepen and improve the United Kingdom-Indian relationship on matters of geopolitical importance, culture, education and particularly trade.
Hon. Members who are historians will know that the UK-Indian trade relationship stretches back some 400 years, with the UK initially being a huge importer of spices, textiles and food items. By the 1850s, the relationship was such that the percentage of total UK trade in goods with India was 8.5% of our trade. Throughout the early decades of the 20th century, the UK enjoyed a huge, growing surplus in bilateral trade, but with independence came caution on the part of India and a distrust of international trade and capital. That was witnessed by the fall of India’s share of world exports, from 6% to 2%. Consequently, by the 1970s, UK-India trade had fallen to just under 2% of total UK trade in goods.
Today, of course, it is a different environment. India is now one of the world’s fastest-growing economies. In respect of UK trade, our imports from India have risen by 250% in the decade 2000 to 2010 and our exports to India have risen by 140%. However, our relative position with this fastest of all fast-growing economies is revealing and shows the harsh reality. In 2000, the UK was the fourth most important location for Indian exports, but it was the seventh most important by 2010. In 2000, the UK was the third most important importer to India, but we had slipped to 22nd place by 2010. That dramatic decline may have many causes, but it is worth dwelling on, or at least making some observations about, why that happened.
First, our shared past and shared language can be both an opportunity and a barrier. I sense from a number of discussions that such familiarity caused an expectation on one side that contracts might be won, but the expectation on another side was that contracts had to be worked for. I suspect that the UK was perceived, in respect of many bids, as not having done the research into the bid process done by many European competitors striving to gain a foothold in that market.
Secondly, the UK was slow to exploit some of its traditional strengths, despite having those clearly signposted. A mark of a fast-growing economy is the need for infrastructure. The UK has been for many years one of the world’s leaders in world civil engineering and infrastructure, yet we were slow to embrace that and were often beaten to contracts by others. The same is true of higher education.
Thirdly, from 2000 to 2010, the UK appeared to concentrate more on European markets, with exporters regarding that as their overriding priority to the exclusion almost of other opportunities, whereas others saw Europe as one market and the world as their oyster.
I hope that the Minister says something about the Government’s position in ensuring that the mistakes of 2000 to 2010 will not be replicated in their policy of encouraging trade.
Latterly, there has been a complete refocusing. I am sure that every hon. Member in this Chamber welcomed the Queen’s Speech of 2010, which explicitly cited India as a destination for the UK to concentrate on in respect of trade. The Prime Minister’s visit in July 2010, with many senior industrialists, has set the tone, which I hope will continue for many years.
Mark Pritchard (The Wrekin) (Con)
On the importance of bilateral trade, does my hon. Friend agree that it is important that British companies are confident when doing business in India? Therefore, ahead of the Indian Prime Minister’s visit in June, it would be good if all outstanding matters surrounding the Commonwealth games were dealt with. Outstanding bills for companies, such as SIS LIVE—the British company that is the world’s largest satellite broadcasting company— need to be paid if British companies are to have confidence in doing business in India.
Stephen Hammond
My hon. Friend is known for his clear-sighted view of the future. He pre-empts remarks that I will make in the very near future. I share his sentiments. As he rightly says, we look forward to welcoming Dr Singh to the UK. I hope that his visit will be seen as a further expression of our shared values and common interests, but much more importantly, with regard to economics and trade, I hope that it will be regarded as a reiteration of the target of at least doubling bilateral trade in the next 10 years. I hope that my right hon. Friend the Minister will be able to say something about the plans in the business arena that he expects to see from Her Majesty’s Government in June.
David Simpson (Upper Bann) (DUP)
The Foreign Secretary made an interesting statement in December last year, saying that Asian consumer spending will reach a high of approximately £42 trillion by 2030. I am sure that the hon. Member for Wimbledon (Stephen Hammond) agrees that the Indian and Asian market is a vast one for British companies. However, the onus is on the British Government to make it easier for companies to export into Asian countries, by helping to remove a lot of the bureaucracy and paperwork that is tied up in relation to that.
Stephen Hammond
I thank the hon. Gentleman for that remark. I will deal with that point specifically in a few minutes. It is the job of government to ensure that there is an environment in which business can thrive. The onus is on both the British and Indian Governments, particularly with regard to some of the bureaucracy.
My hon. Friend the Member for The Wrekin (Mark Pritchard) mentioned SIS—Satellite Information Services. I declare that I have already spent a day in Delhi, meeting local journalists and local people, trying to ensure that that company receives the correct treatment that it deserves from the Indian Government. The contract was awarded to SIS to cover the Commonwealth games, against a difficult backdrop, including late access to the stadiums, and it was generally accepted that an outstanding job of coverage was completed. The troubles began at that stage, but the company has enjoyed the support of the UK Government, with interventions from Ministers in the Department for Business, Innovation and Skills and the Foreign and Commonwealth Office, and from the high commissioner in Delhi.
In essence, for hon. Members who are not aware of this story, allegations of impropriety in the awarding of a number of contracts were made. Why such allegations arose may be speculated on: whether to do with domestic Indian politics or disappointed companies. None the less, in response to Opposition and media pressure, the Indian Government commissioned a high-level report, known as the Shunglu report, which has now concluded.
The issue is that SIS has not really been given a chance to state its case: it was not given the chance to submit evidence or to be questioned by the Shunglu Committee. Moreover, the company has still only received 60% of the contractual payment due to it, with 40% remaining unpaid, and it has had to pay a 10% subcontract, so 50% in terms of monetary value remains unpaid. It is a matter of regret that the committee failed to check and to verify some of the information in its report. It is a matter of even greater concern that the second report by the Comptroller and Auditor General failed to pick that up. SIS sought to resolve the matter, correctly, through diplomatic and commercial channels, but it is disappointing that the efforts by her Majesty’s Government and high commissioners from the United Kingdom and many other nations have not had success. I sincerely hope that the legal proceedings in India will not be involved.
On the point made by the hon. Member for Upper Bann (David Simpson) about some of the issues facing companies that trade with other nations, to many in the commercial world, the failure to settle a contract that was set up in good faith by an internationally respected organisation will be of concern, because it will show that if a company becomes involved in a long-running domestic political dispute, non-payment of funds could threaten its economic operation. In the sporting world, where the Commonwealth games were a success, India is scoring an own goal post those games, and there is a chance, as my hon. Friend the Member for The Wrekin said, that the visit by the Indian Prime Minister will be overshadowed by this matter. It is important to put that on the record.
Mr Laurence Robertson (Tewkesbury) (Con)
I know the company very well from my activities in the House. It is very strong in charitable work and many other aspects, and it is indeed bad that the matter remains outstanding after so long.
Stephen Hammond
My hon. Friend is, of course, correct. We can only hope that the Indian high commission in London will make that point to its Government. I know that my right hon. Friend the Minister has already made the point.
I return to the issues surrounding Dr Singh’s visit and the matters that we must reiterate to the Indian Government for doubling bilateral trade. We all accept the need to rebalance our economy, but we must exploit those areas of competitive advantage, and clearly a major one is and will remain financial services. The City of London corporation has been working actively in India for some time to build the City as the partner of first choice for the provision of financial services and to highlight the UK as a location of choice for overseas investment. The opening of the Mumbai office, and the lord mayor’s regular visits allow a continuing dialogue on the issuance of capital, insurance, asset management, infrastructure finance, consultancy, London exchanges, and legal matters. I could go on.
Our ability to expand trade in financial services would benefit from the removal of some of the restrictions that are in place on foreign institutions. There has been some liberalisation of the rules for foreign banks, which are now allowed to open 12 new branches a year, but there is a huge appetite among many international banks and particularly UK banks for a much greater allowance for branches in India. There is also countervailing pressure on UK banks that want to become established in India, not to open branches, but to form wholly owned subsidiaries, thereby receiving national treatment. They receive only partial national treatment, and that does not equate to the same treatment received by Indian banks that are trying to set up. I hope that the Indian Government will listen to the need for further liberalisation.
The same is true for both legal services and the accountancy profession. Broadly speaking, restrictions are such that internationally respected firms of lawyers and accountants are unable to practise on the Indian subcontinent.
Priti Patel (Witham) (Con)
India’s economic liberalisation has been taking place over the past 20 years, and things are moving fast. Does my hon. Friend agree that India must concentrate on sorting out business practices and ethics to ensure that all businesses in India and those in the UK that choose to go to India are not affected reputationally, as SIS has been?
Stephen Hammond
My hon. Friend is absolutely right. One of the greatest encouragements to international trade is certainty in the business environment, whether political, legal, accountancy or business ethics. She makes an outstanding point, which is absolutely correct.
I have touched on the financial services industry, and I hope that the Minister will outline what the Government are doing to ensure that pressure is maintained for further liberalisation of the area. There are other industries in which the relationship between the United Kingdom and India is growing and could be pivotal to us if we accept the opportunities. In the telecoms world, the UK has traditionally enjoyed, and still does, a competitive advantage over many countries in Europe and the world. It has been a leader in the development of mobile and tele-optic fibre technology and policy.
India suffers from a highly fragmented mobile technology market and might benefit if it were slightly less fragmented, but it is undeniably true that the market is dynamic. In one of the past six months, 18 million new mobile connections were made, and there is significant demand from the Government for the enhancement and expansion of broadband and some machine solutions to manage logistics. There is an opportunity for the UK telecoms industry, and it could become pivotal to our future.
The same is true of the higher education sector. One of the last high commissioners, His Excellency Nalin Surie, expressed disappointment that the UK had failed to grasp the opportunities that India thought that it was opening up to UK academic institutions and at its inability to open faculties in India. At last, over the past two or three years, there has been reversal of that. There are immense opportunities for new faculties and collaboration on high tech and pharmaceuticals, particularly in some areas of post-doctoral research. The UK higher education sector would do well to grab them.
Jim Shannon (Strangford) (DUP)
I congratulate the hon. Member on bringing this debate to the Chamber. He referred to education and the adoption of cultural links. In my constituency, Orange district lodge No. 4 has been actively involved in raising money to build a school for orphan children and for their health. Comber rotary club has been raising money for polio vaccination. Business opportunities come through health links, church links and human rights links. Does the hon. Gentleman believe that such links are overlooked by the Government and should be encouraged?
Stephen Hammond
I agree entirely that there are huge opportunities outside the industries that I am talking about. Owing to pressure of time, I shall conclude my comments in the near future, but I am sure that colleagues will want to talk about opportunities and other industries. The hon. Gentleman is correct. I had the opportunity of seeing one of the major Indian health care providers and what it is offering to the UK. There is collaboration with UK pharmaceutical firms on drugs to the Indian generic market. There are huge opportunities.
The Indian economy will grow less slowly this year than in previous years, but at 9% it will still be one of the fastest growing economies in the world. That will inevitably bring pressure for further infrastructure development. The new five-year plan suggests that it wants $1 trillion added to its infrastructure budget for capacity in power, roads, rail, ports, aviation, housing, office and social infrastructure. The UK has not only civil engineering expertise and project management ability, but acknowledged skill in project finance. I hope that the UK infrastructure industry, in the widest sense, will embrace the opportunity of that size of development.
Jeremy Lefroy (Stafford) (Con)
Does my hon. Friend agree that one of the key drivers of bilateral trade is inward and outward investment? In my constituency, Perkins has just announced the building of a factory in India, and there is inward investment in the constituency of my neighbour, my hon. Friend the Member for South Staffordshire (Gavin Williamson), by Tata through Jaguar Land Rover.
Stephen Hammond
I thank my hon. Friend for his intervention. Indeed, I thank all the hon. Members who are intervening; they are helping me along with my speech. I was about to deal with inward investment. My hon. Friend is, of course, right. India may well be setting the pace at the forefront of the global economy. Indian companies’ entrepreneurship and management techniques are certainly influencing business practices across the world. However, let us be clear: the UK must not only welcome Indian investment into the UK, but be hungry for it and go out and seek it.
As my hon. Friend pointed out, there are huge advantages to investing in this country. They include the skilled work force and the certainty on law, politics and accountancy. Tata’s investment in steel production and car manufacturing is an example. Other Indian businesses have chosen to base themselves in London or elsewhere in the United Kingdom, partly because of the expertise and skills on offer. We must make certain that other Indian firms looking to invest know that Her Majesty’s Government stand ready to welcome Indian businesses. I hope that the Minister will echo the remarks of his colleague, Lord Green, who has said that
“those days of complacency on the British side are over.”
Britain is open for business.
Mr Virendra Sharma (Ealing, Southall) (Lab)
I congratulate the hon. Member for Wimbledon (Stephen Hammond) on obtaining this important debate. This issue is close to the heart of many members of the all-party group on India, as well as hon. Members more generally. Does the hon. Gentleman recognise the value of the state-based schemes to promote UK-India trade? I have worked closely with, for example, the UK Kerala Business Forum and the UK Telugu Association, both of which are making great progress in building links for investment going in both directions.
Stephen Hammond
The hon. Gentleman is, of course, right. I am sure that the Minister will want to refer to his remarks. As I said, it is the job of government to encourage and to provide the environment in which business can thrive. It is for business to grasp that opportunity. Dr Singh visits this country later this year. I hope that the tone and the tenor of the debate will ring out today and send the message that Britain is open for business and particularly for Indian business.
Mr Charles Walker (in the Chair)
Colleagues, as you can see, time is getting away from us. The winding-up speeches start at 10.38 am. The Backbench Business Committee is under-utilised at the moment, so I am sure that it would like to receive a representation from hon. Members who are not called to speak today.
John McDonnell (Hayes and Harlington) (Lab)
I congratulate the hon. Member for Wimbledon (Stephen Hammond) on securing the debate. It comes at a vital time in the trading relationship between these two countries, because the European Commission and the Government of India are aiming to conclude the free trade agreement during the EU-India summit on 8 February in Delhi. The next fortnight is therefore a critical opportunity—the last opportunity—for us to try to influence that agreement.
I urge the Minister to do all in his power to ensure that it is not just a free trade agreement, but a fair trade agreement. A number of significant and expert non-governmental organisations working in this field have raised serious concerns about the consequences for some of the poorest people in India of the free trade agreement as proposed by the EU at the moment, and are seeking amendments to the agreement in this last phase.
When I raised the question with Ministers at the Department for Business, Innovation and Skills, I was referred to the conclusions of the European Union’s sustainability impact assessment. The Minister pointed out that as a result of the FTA, there would be an overall reduction in both rural and urban poverty. The study does come to that general conclusion, but there are sections in the report, particularly relating to the rural poor of India, that give cause for concern. It demonstrates that there will be an increase in the wealth of the rural poor only if they are, for example, connected to the supply chains that will flow from the FTA and if they are in suitable locations, with adequate infrastructure. The problem is that most of the rural farmers do not operate with adequate infrastructure and are not organised in the way in which the FTA describes; nor is domestic policy likely to change that. Therefore, the impact assessment by the EU, as against one by our Government, is, in this and many other areas of the report, at best wishful thinking or at worst simply determined to prove the case for the FTA.
Mr Gregory Campbell (East Londonderry) (DUP)
The hon. Gentleman touches on an important point. The UK farming industry and, in particular, small businesses that excel in the international market can assist in poor rural areas in India, especially in terms of delivering higher yields through best practice, and can assist in promoting trade between the UK and India.
John McDonnell
That is exactly right, and it is one of the issues that need to be dealt with in the final negotiations so that people are appropriately placed and organised to enable that to happen.
In contrast to the EU’s assessment of the FTA is the more realistic and deeply worrying alternative assessment of the potential impact of the FTA that was published only a few weeks ago, in December, by organisations working in this field: Misereor, the Heinrich Böll Foundation, Anthra, the Third World Network and Glopolis.
Lorely Burt (Solihull) (LD)
Like the hon. Gentleman, I am focused on the EU-India summit in February. Does he agree that that summit is not likely to achieve the free trade agreement that we all wish to see and that a major block relates to mode 4 services? I am referring to the negotiation of a temporary transfer of personnel from a partner country to provide a service to a corporation. If the UK Government can move on mode 4, we may well be able to move things along much better.
John McDonnell
There are real opportunities for the UK Government, with their vast experience of trading relations with India, to influence the FTA in a more realistic way, which will achieve all our objectives.
There was a previous assessment in 2008 by the organisation Traidcraft, with which many hon. Members have worked. It concluded that there were real concerns. It stated that
“the proposed…FTA…risks stripping away the very tools that India could use to re-balance the gains from growth and to ensure that the poor are not further marginalised.”
That reflected not just statements from NGOs, but a statement from the UN itself.
The joint report, published in December, focused on undertaking a right-to-food impact assessment—the impact on people’s ability simply to feed themselves. The results are worrying and warrant serious consideration by the Government in relation to the final drafting session for the FTA.
The FTA is designed to liberalise substantially all areas of trade. It contains sections on services, investment, public procurement, intellectual property rights and many other areas. It will oblige India to eliminate 90% of its tariffs applied to the EU within about seven years. The assessment by the NGOs focused on a limited number of farming or agricultural issues. I will give just some examples. Some 14 million Indian farmers are currently involved in dairy production. Most of them are small-scale, marginal or landless farmers. Their market access, incomes and right to food would be threatened if tariffs for EU skimmed milk power were cut from 60% to zero as planned.
Tony Baldry (Banbury) (Con)
India’s economy is growing at 7% a year. Does not the state of India have some responsibility itself to ensure that the benefits of that growth in its economy are more evenly shared among the people of India?
John McDonnell
Of course. In the negotiations to which I am referring, it is important that the UK Government in particular, with their influence in Europe, enable the transitional period of the next seven years to be used effectively, so that it does not impoverish people but ensures the growth and wealth of both countries.
I am giving just three examples; I am worried about a shortage of time. The dairy industry will be faced with agriculture in the EU continuing to be heavily subsidised. Reform of the common agricultural policy has not happened, so EU farmers will be relying on export refunds. The dairy quota has been abolished. They will increase their production and therefore put at risk many poor Indian farmers.
The risk is the same in relation to poultry keeping. About 50% of India’s landless and marginal farmers use poultry keeping to supplement their livelihoods. Again, they will be at risk as a result of the reduction from 100% to zero in the current tariffs that is taking place.
About 37 million people in India work in the retail sector. There are 10 million street vendors. It is envisaged that if multi-brand retail is opened up to EU retailers, such as Carrefour, Metro and Tesco, that will bring 1.8 million jobs, but possibly at the cost of 5.7 million people working in that sector.
There are concerns about land distribution, which is highly unequal in India, where 83.29% of farmers have an average land holding of less than 2 hectares and own only 41.42% of agricultural land. There are real concerns that the FTA’s protection for increased inward investment will hold up land reforms.
There are real concerns about third-country impacts. In the case of Bangladesh, the EU’s own assessment says that there could be a 0.5% loss of exports, which does not sound significant, but as the Bangladeshi garment workers union has pointed out, that could cost 150,000 women their livelihoods.
Given the FTA’s implications for India’s poor—I remind Members that the latest estimate is that 224 million people, or 26.9% of the population, live with chronic hunger—and given our concern about the significant weaknesses in the EU’s initial impact assessment, it falls to this Parliament and this Government to ensure that the FTA secures fair trade.
I congratulate the Government on having been courageous in maintaining their support for aid to India, but that support could be wiped out as a result of the FTA’s unfairness. May I therefore briefly suggest a number of things that could be inserted into the treaty to assist in protecting India’s rural poor?
First, before the FTA is signed, it should be agreed that the EU and the Indian Government conduct a comprehensive human rights impact assessment, and that should include the principles in the UN rapporteur’s right to food. That is in line with a 2008 resolution in the European Parliament, which agreed that such impact assessments should take place before trade agreements are signed.
Secondly, before the agreement is concluded, there should be meaningful consultation with all stakeholders, and particularly the vulnerable, with full openness and transparency. Thirdly, the tariff lines for poultry and dairy products should be exempted in the agreement at this stage. There should also be a mechanism in the treaty for identifying any other products that may need protection, particularly during the transitional period.
In addition, there should be a special safeguard mechanism to enable India to react to sudden import surges. There should also be no provisions in the treaty limiting the right to secure the redistribution of land. Finally, there should be a monitoring mechanism in the treaty to ensure the continuous assessment of the FTA’s human rights impact as a result of the trade in goods.
Those provisions are critical. We have a detailed knowledge of what has happened when FTAs have been concluded elsewhere in the world and not been properly scrutinised. They have not only failed to tackle poverty, but undermined the ability of individual Governments to reduce it. Armin Paasch’s report for Ecofair Trade Dialogue has evidenced and exposed the fundamental shortcomings of many EU FTA treaties.
It is not often that I pray in aid Peter Mandelson, but he argued in yesterday’s Financial Times that, before such a treaty is put in place, we have a responsibility to ensure that the domestic capabilities exist to enable it to be used to the best advantage of both the trading partners signing it. That has not happened in this case.
We have a few weeks to resolve this matter. If we do not act at this critical stage, the traditional Indian and UK relationship of good trade, which those of us who have spoken in the debate are urging should continue, could be undermined.
Mr Charles Walker (in the Chair)
Order. I remind colleagues that the winding-up speeches start in 34 minutes.
Tony Baldry (Banbury) (Con)
I shall make three brief points. First, following on from the comments of the hon. Member for Hayes and Harlington (John McDonnell), there is no stronger advocate in the House than I of the need for the UK to have a strong international development programme. As a former Chair of the Select Committee on International Development, I think we all owe a duty of care to the very poorest in the world. However, India, which has a nuclear programme and a space programme, and which spends a considerable amount of its GDP on defence, also has a duty of care and a duty to ensure that the growth of its economy is more fairly shared among its people. We should be careful that we do not find ourselves in a position where the west and Europe are somehow expected to look after India’s poor, while India’s middle and upper classes continue to get wealthier and, on occasions, disregard the poorest in their community.
My second point is this. When I was fortunate enough to be a Minister in John Major’s Government, we set up the Indo-British partnership initiative, so there has been no shortage of UK Governments seeking to engage with India and increase trade with it. However, as my hon. Friend the Member for Wimbledon (Stephen Hammond), who introduced the debate, accurately described, we have been falling down the league table very fast. Twenty years ago, we were very high in the league table, but we are now in something like 15th position. Some of the countries that have overtaken us, such as Nigeria, may well have done so because they are selling a lot of oil to India, but some work needs to be done by the Foreign Office, BIS and UK Trade & Investment to analyse why we are falling down the league table. What are other countries doing that is moving them further up it? In part, as my hon. Friend said, it is because the Indian Government still restrict activities in areas of the economy where Britain is strong, such as banking, insurance and legal services. However, that does not, of itself, necessarily explain why we are falling down the league table. We therefore need a solid piece of work and analysis in Whitehall by the Foreign Office, BIS and UKTI as to why that is happening.
My third and final point is this. Yesterday in the House, the Foreign Secretary announced a further round of sanctions on Iran. Two days ago, the Indian Oil Minister announced that India would seek to purchase considerably more oil from Iran, given the lowering of the price of Iranian oil. India has aspirations to join the Security Council, but it cannot show two faces: it cannot show one face to Europe, as a partner to Europe and the international community, and seek to be a member of the Security Council, but then show a different face to some of its neighbours in Asia. If international sanctions against Iran are to be effective, every responsible nation must enforce them, and that includes India and China. They cannot take advantage of the fact that the European Union and many other countries are imposing oil sanctions on Iran to seek to purchase cheaper oil from Iran for gold, which would have various other consequences. India must be a full player in the international community if it is to be taken seriously.
Barry Gardiner (Brent North) (Lab)
I am delighted to serve under your chairmanship, Mr Walker. In accordance with your guidance, I will try to speak exceedingly quickly. I am delighted to speak in the debate, and I pay tribute to the hon. Member for Wimbledon (Stephen Hammond) for initiating it. He has made many valuable points.
For the past 15 years, I have counted myself, and been counted, as a friend of India. In 1999, I founded Labour Friends of India, which I now once again chair. I set up and currently chair the all-party group on UK-India trade and investment. I declare those matters as interests. I have argued the case for, and often defended, India in Parliament. However, true friends do not just tell us what we want to hear, and today I want to be a true friend of India—yes, praising her development and economic progress, but also highly critical of her failure to achieve her full potential for economic growth.
There is no doubt that India’s growth is impressive. Like all the BRIC nations, she has consistently outgrown long-term predictions, with average growth of 7.45% between 2000 and 2011. India emerged practically unscathed from the international financial crash, with GDP dropping only as low as 5.8%—a figure unimaginable to us in the UK during peak periods.
The advancement in infrastructure has been clear to see for those who are frequent visitors, and the UN recently reported that India is on target to reduce her poverty rate from 51% in 1990 to 22% by 2015. The suggestion of the hon. Member for Banbury (Tony Baldry) that the Indian Government are not doing enough to tackle the country’s domestic poverty is frankly outrageous. However, of all the BRIC nations, India is the furthest removed from its potential, and the causes of that disparity show no sign of changing soon.
India’s failure to reform its markets, deal with the problem of corruption and establish a market conducive to foreign investment means that it has consistently failed to realise its potential for growth. If those structural problems continue to plague India in the years ahead, it will struggle to maintain the current rate of poverty reduction and development, and will stand no chance of building the infrastructure that it will require, just a quarter of a century from now, to deal with what will then be an ageing population.
On regulatory reform, India has consistently dangled the carrot of liberalisation in front of investors, only to renege on its promises and refuse to change. Making promises of reform that remain unfulfilled is more damaging than refusing to reform in the first place. Just last week, the central Government caved in to public pressure and paused the long-awaited retail sector reforms.
A recently released study estimated that those reforms would have opened the door to more than $1 billion of foreign direct investment in the food retail sector and increased the size of the organised retail market to $260 billion by 2020. That would have resulted in an aggregate increase in income of $35 billion to $45 billion a year for all producers combined, 3 million to 4 million new jobs directly, and 4 million to 6 million new indirect jobs. The Government also stood to gain by the move and would have expected to receive an additional income of $25 billion to $30 billion, by way of increased tax collection and reduction of tax slippages. That investment is not only on hold, but at permanent risk, as investors begin to question whether India will ever follow through its pledges on liberalisation.
Retail is just one sector where foreign investors are begging for the reforms that will allow them to start pouring capital into the country. Last week I met representatives from the UK’s banking, accounting, insurance and legal sectors. They told me that they had been poised to invest heavily in India for decades, but their patience, too, is wearing thin. In the retail banking sector, the largest foreign bank in India is limited to fewer than 100 branches, in a country with a population of more than 1 billion. It considers itself fortunate; the strict licensing laws have until now limited almost all other foreign banks to one branch in Mumbai.
With liberalisation, the banking sector would pour tens of billions of dollars into India. In the legal sector, the limitations are even stronger. No foreign lawyer is allowed to practise in India. The Indian market is dominated by small-scale practices rife with corruption and inefficiency. Liberalising the legal sector would improve productivity, pull billions of dollars of foreign investment into the country and go a long way towards eliminating the graft that stagnates that legal system.
Perhaps the best example of India’s hesitance on market reforms, however, is the EU-India free trade agreement—the longest awaited free trade agreement in European history. Time and again, negotiators have made compromises and offers, only for the goalposts to be moved. Despite compromises on medical patents, immigration and other areas, the Indian Government seem as far away as ever from signing.
India now insists that reforms in such areas as financial services and retail are for bilateral agreements, not EU-wide treaties. Those involved in the negotiations from an EU perspective have begun publicly doubting whether India wants to sign the treaty at all. The FTA exemplifies the failure of Indian leaders to grab the bull of reform by the horns, and drag India into the modern global economy.
It is not just market reform and liberalisation that hold India back. On a range of issues including the use of technology, agricultural productivity, education and the problem of corruption, India needs to do more. We know that India can transform sectors when it decides to. The infrastructure strategy for the current five-year plan is astonishing. The Government have predicted that $1 trillion will be spent on infrastructure over the next five years. That means billions of dollars of foreign investment that will revolutionise the infrastructure of the country and prepare it for its future needs in transport, energy and housing. It is just a shame that that bold vision is not repeated in other areas of the economy.
On corruption, Congress has repeatedly refused to take the steps that would not only mark the beginning of the end for corruption in India, but would reassure Indians, as well as foreign investors, that the Government are serious about tackling the problem. Anna Hazare and his supporters have been attacked. They have been deliberately frustrated and undermined by politicians from all parties.
Barry Gardiner
Other colleagues want to get in, so I will not take interventions.
The most recent version of the Lokpal Bill has question marks over it with respect to the independence of the body it would create and why senior politicians and judiciary should be excluded from its reach. A stronger Bill, which satisfied all the concerns, would have sent the message across the world that India will no longer tolerate corruption and graft.
I reiterate that I outline these criticisms out of concern for India, and in the hope that its Government will indeed make the necessary reforms to enable the country to bloom in the coming decades. But India is by no means alone in its failure to change.
Here in the UK, we have fundamentally failed to realign our trade and investment towards the economies that will offer the best prospects for growth and returns in the future. I praise the focus that the current Government have placed on trade with India, including the Prime Minister’s first overseas visit, but we need to do much more.
Between 2000 and 2010, the UK’s imports from India rose by 250%, while UK goods and services exported to India rose by 140%. Over the period, India has become a relatively more important trading partner for the UK. UK imports from India in 2010 accounted for 0.9% more than in 2000 and exports of goods and services to India accounted for 0.4 of a percentage point more than in 2000. That is to be expected. As India has grown in importance on the world stage, so it has grown in importance to the UK’s overall trade.
However, it is not against the percentage of overall UK trade that we should judge whether trade with India has grown enough, but against the percentage of overall Indian trade. That is the only way to see whether British companies are making the most of the opportunities available in India, and whether the Government are doing enough to prepare businesses and the general population for the shift in the balance of economic world power that will move eastwards in the rest of the century.
Despite growing at such a high rate, between 2000 and 2010 the UK fell from fourth to seventh in the list of India’s largest export markets, and was overtaken by Singapore and the Netherlands. Similarly, in terms of import partners, the UK fell from third in 2000 to 22nd in 2010. Most recently, we were overtaken by the Republic of Korea. The UK now provides only 1% of all imports into India. That shows that Britain is falling behind in the world race to provide India’s population with the goods and services they want. In our current economic situation, with the lowered demand of our domestic and European markets, we cannot afford that to continue. Our companies must begin to look to India far more as a source of growth and as an essential market for their future survival. The trade delegations and CEO forums will undoubtedly help to close the gap, but the Government need to be much more active in promoting India to British businessmen and entrepreneurs.
There are good programmes, which must be increased in size. The UK-India education and research initiative is a scheme designed to increase links between educational institutions in our two countries. Education is one sector in which India needs huge growth in the coming years, and it also happens to be one in which the UK is a world leader. The scheme establishes relationships between universities, but so far has involved supporting the development of only two new universities in India, and supporting a small number of exchange students.
If we are serious about targeting India as a major source of our future growth, we need to support tens of thousands of Britons to study in India and build the personal and cultural connections that will help them successfully navigate the Indian market in the future. We need to work with all UK educational providers to offer them active assistance in penetrating the Indian market.
My view of the relations between the UK and India is a real masala. I am profoundly hopeful, but also seriously worried. I am hopeful that India will make the changes needed to maximise its growth, eradicate poverty and prepare for the future, but I am worried that the required leadership may come too late. I am hopeful that British companies can take their proper place in the Indian market and help to provide our economy with growth for the future, but worried that UK businesses and entrepreneurs have become too hesitant to grasp the opportunities.
Finally, I note that the high commission does not have a presence here today. That is extraordinary for a debate of this nature on India. I have never known that to happen before, and it shows not only a lack of rudder at the high commission but a downgrading in the mind of the Indian Government of the importance of what we say in this Chamber, and of the UK in India’s relationships.
Mark Field (Cities of London and Westminster) (Con)
It is a pleasure to be here under your chairmanship, Mr Walker, and in a debate initiated by one of my close friends in Parliament, my hon. Friend the Member for Wimbledon (Stephen Hammond). I will speak, if I may, very briefly.
I have made two visits to India—in 2003 and in 2006. Between those years, there was a change in Government. What struck me was the confidence of the business and political classes in New Delhi and Bombay. I suspect that, six years on, there will be an even greater sense of a country that is forward looking and confident of the future, notwithstanding all of the issues that have been raised by hon. Members in this debate.
Above all, it is important that we do not see India as just another Asian nation. Both UKTI and the Foreign Office have tended to regard Asia as just one area, which is what we tend to do with eastern Europe as well; we see it as an homogenous area rather than recognising its great historical importance.
One of the issues that I hear time and again, particularly where our companies are competing against German companies, is that the German embassies based in India, China or South Korea recognise that their role is not to be some sort of propagandist for their country but to drill down and work out who is really important in the local community. Therefore, it is important to have attached to the embassies people who are there for many years, developing long-term relationships.
Mark Field
If the right hon. Gentleman does not mind, I will not give way, because other Members wish to speak.
There is a lot of doom and gloom at the moment. We have seen today that our economy has contracted by 0.2% in the past three months, which I suspect may be the precursor to a fully fledged recession in this country in the next few months. Clearly, there are major problems in the eurozone market, which are not going to go away any time soon. In fact, I fear that they will be there for a long time to come, because there is not the political will to drive forward. As a result, it is perhaps easy to be gloomy about the economic situation. One of the interesting things about the IMF report yesterday was that it was presented as being very negative, but even the most pessimistic scenario suggested that there would be global growth of 3.3% next year. Indeed, some 4% was suggested during 2011.
In a conversation with one of the two Chinese law firms that have opened in London in the past couple of years I mentioned the global economic recession. A partner, who was a Chinese native with perfect English, smiled and said, “Back home, we call it the north Atlantic crisis”. There is a very important lesson for us to learn. Amid all that doom and gloom, let us get out there and recognise that we have great strengths.
In relation to India, some of the important issues have already been mentioned. We clearly have some good connections on the manufacturing side, especially in the technology and bio-technology sphere. There is much that India can teach us. Nehru has that legacy of those five great technology universities that remain a great success.
The Minister has done a phenomenal amount of work in this area in often difficult circumstances. Privately, he knows that I do not entirely support our immigration policy and I suspect that, behind closed doors, he has some sympathy with my views. We need to be a beacon for the brightest and the best. We must encourage young Indian, South Korean and Chinese people to come to this country. If they spend two or three years as students here, they will be ambassadors for this country for the rest of their lives. I am afraid that our policy on the headline figures is wrong. [Interruption.] I do not wish totally to eliminate the Minister’s career, and I am sure that he has a few words to say.
The Minister for Universities and Science (Mr David Willetts)
I completely support the policies of the Government of which I am a Member. There is no numerical limit on the number of overseas students coming to study in Britain, provided that they have the proper qualifications and they are going to attend a legitimate higher education institution.
Mark Field
I do understand that. Will the Minister also recognise, though, that the message is that this country is not entirely open to those brightest and best people? We must have a message that we are open not only for business but for the brightest and best to come to this country.
Mark Field
If my hon. Friend will excuse me, I will not give way because others really do wish to speak.
As a London Member of Parliament, I believe that if we are to exploit these connections with India, we urgently need to invest in our infrastructure—what I am about to say now will give the hon. Member for Hayes and Harlington (John McDonnell) some satisfaction—which means a 21st-century airport. Even before Boris Johnson talked about an estuary airport on Boris’s island, I was a great believer in an entirely new airport. Patching and mending either Heathrow or Gatwick is not the right solution. A new airport will be one of the most positive messages that we can put across. We want to attract the brightest and best, particularly out of Asia. An estuary airport will provide the dozens of flights that we need each and every night to come through from those countries to land in London without disturbing the constituents of the hon. Gentleman or of many other London MPs. Thank you, Mr Walker, for allowing me to make a brief contribution.
Caroline Nokes (Romsey and Southampton North) (Con)
I congratulate my hon. Friend the Member for Wimbledon (Stephen Hammond) on securing this important debate and on having led, in September, a parliamentary delegation to India, in which I was fortunate enough to participate. Coincidentally, our delegation went to India at exactly the same time as a delegation of members of the Solent India Business Network. India is a large country and we did not manage to meet up.
I want to draw attention to the work done since 2009 to foster business links and trade relations between small and medium-sized enterprises in the Solent region, which the Minister will be particularly pleased about and proud of, and British business groups in India.
The delegation attended a conference in Pune and a historic memorandum of understanding was signed between the British business network in the UK and the British business group in that part of India. The co-chairmen of the network are a local solicitor, Amarjit Singh, and the deputy vice-chancellor of Southampton university.
Paul Uppal
In reference to the discussion that we had about attracting the brightest and the best, Leeds university is taking a lead on this with a campus in Bhopal. That is one way to get service providers and students working together around the immigration problem.
Caroline Nokes
I thank my hon. Friend for those comments. Pune university has a staggering 650,000 undergraduates, which is an enormous number compared with Southampton university. However, that does not prevent the two institutions from working together to share business visions and fresh perspectives. My hon. Friend the Member for Cities of London and Westminster (Mark Field) mentioned that young people are the future, and that is exactly the sort of initiative and message that is being promoted in the Solent region.
I am conscious that my comments about Anglo-Indian trade relations will be exclusively positive because that is the experience of the members in my constituency.
Priti Patel
I am delighted to hear that the experience of my hon. Friend’s constituents has been positive, because, as we have heard during this debate, things have not always been perfect. Does she hold the view that when Dr Singh comes to visit this country later this year, it is incumbent on our Government to raise some of the barriers to doing business, particularly relating to corruption and the other issues that have been raised here today?
Caroline Nokes
My hon. Friend makes an important point. We cannot focus just on the positives, although they are there and they are important. We must ensure that some of these issues are resolved, preferably before the Prime Minister’s visit in the summer.
I hope that the initiative that we have seen in the Solent region is not the first, and that it is something that can be spread across the whole of the UK. I know that UKTI has been very positive in supporting that view and is looking forward to welcoming the delegation from Pune when it comes to Southampton later this year. In short, I regard our relations as wholly positive. I have kept my comments deliberately brief so that other Members can contribute. I hope that the links that we have established in the Solent region will go from strength to strength.
Lorely Burt (Solihull) (LD)
My hon. Friend the Member for Cities of London and Westminster (Mark Field) should have no fear about the need to build a Boris island, because we are having our runway extended in Birmingham, in the west midlands, where a great number of members of the Indian subcontinent reside and we will be able to take another 18 million passengers.
The biggest employer in my constituency and a key player in the west midlands in terms of jobs and growth is Jaguar Land Rover. We have heard about corruption, but that company is exemplary. It is a far-sighted company that looks towards the medium and the long term and cares for its employees.
I want to speak briefly about the EU-India free trade agreement. We have already heard about the summit that is due to take place on 10 February. However, despite hopes that negotiations about the agreement will reach a conclusion, it has become clear that the best expected result is a limited agreement on trade in goods. Crucial negotiations on services, investment, public procurement and intellectual property rights will continue. The failure to reach agreement on those areas is a shame, because there are huge benefits for the EU generally in reaching agreement with India. India is a market of more than 1.2 billion people, with a burgeoning middle class and an economy that, according to some statistics, is now growing faster than that of China.
For the UK, trade with India is hugely important. In 2009, it was worth £11.2 billion. Moreover, the UK seems a natural partner for collaboration with India, particularly on education, which has already been mentioned, as well as on low-carbon and energy efficiency development, science and research, and advanced manufacturing, including in the aerospace and defence sectors.
Among the most serious obstacles in the negotiations about the EU-India free trade agreement are the unwillingness of India, first, to include the automotive sector in the agreement and, secondly, to reduce the tariff on car imports, which is currently 100%. India is also unwilling to include wines and spirits in the agreement. For example, our wonderful Scotch whisky receives a tariff of 150% in India. And another obstacle is the reluctance of India to include a sustainable development chapter in the agreement.
I am sorry to say that the EU is also putting in place obstacles to the agreement. They include an obstacle related to mode 4 services, which is a controversial “defensive” interest for the EU. “Mode 4 services” refers to where the EU negotiates the temporary transfer of personnel from a partner country to provide a service within a corporation for a limited period of time. The EU normally only negotiates trade commitments for professionals if they have at least a university degree-level of education. It is a great shame that we cannot allow other people to come into the EU for a limited period when they have skills to bring, including training skills, and when they have a contribution to make to the economy of the EU, including the British economy.
Keith Vaz
The hon. Lady makes a very powerful case for relations with India. I want to make one point. When our Prime Minister and our other leaders go to India for summits, far too often they take “the great and the good” with them. Is it not important that they should also try to take representatives of some smaller businesses, which are the driving force of growth in trade between our two countries? And those representatives of smaller businesses should of course come from Birmingham too.
Lorely Burt
The right hon. Gentleman makes an even more persuasive case by referring to Birmingham. He is absolutely right that small businesses are the generator that is dragging us out of this recession, and the ability of small businesses to access Indian markets is vital. He could not have made a more appropriate point.
Can the Minister say whether the Government will reconsider their position on mode 4 services and come back with an improved offer as a means of unlocking the EU-India free trade agreement, hopefully by the end of this year?
Geoffrey Clifton-Brown (The Cotswolds) (Con)
Thank you very much, Mr Walker, for allowing me to catch your eye and speak in this debate. I will follow the lead of my hon. Friend the Member for Banbury (Tony Baldry) and make a few points briefly. I hope that someone else might be able to speak before the wind-ups begin.
The first thing to note is that I think that this is one of the first parliamentary debates that we have had on trade in the past five years, and the popularity of this debate shows the importance of trade. As Britain learned in the 17th and 18th centuries, trade is not a zero-sum game. The more that nations trade, the more that they create prosperity and jobs, so trade is hugely important.
The problem for us is that 65% of our trade is with countries in north America and Europe, but between now and 2020, the gross domestic product of those countries as a proportion of world GDP will decline by 40%. By contrast, between now and 2030, GDP in the BRIC countries—Brazil, Russia, India and China—as a proportion of world GDP will increase by 40%. Basically, we are not trading with the right people; we need to increase our trade with the BRIC countries, whose economies are growing.
I entirely agree with my hon. Friend the Member for Banbury that both UK Trade & Investment and the Department for Business, Innovation and Skills need to do a proper job of work to determine why the UK’s trade deficit with India has increased hugely during the past 10 years, as demonstrated by the statistics that the hon. Member for Brent North (Barry Gardiner) has just cited. UKTI needs to benchmark itself against rival successful operations around the world, such as the trade organisations in Germany and Hong Kong, to find out what it could do better to encourage more trade with India and other countries.
Trade is a two-way thing; it is not only about exporting but about foreign direct investment. One or two Members, including my hon. Friend the Member for Stafford (Jeremy Lefroy), have mentioned FDI already. FDI is incredibly important to this country. Why did Li Ka-shing, the Hong Kong property tycoon, invest in Felixstowe, our biggest port, and transform our port industry? Why did the Japanese invest in our car makers, effectively bailing them out, in the 1960s and 1970s? FDI—inward investment—is incredibly important for jobs. Not only do we need to encourage more FDI, but we need to encourage those foreign companies that have already invested here to invest more here than they have already.
I want to mention education. My right hon. Friend the Minister will be interested to know that 38,500 Indian students came here to study last year, but guess what the number was for China: 110,000. In India, 600 million people are under the age of 30—a demographic that will propel India into the world lead for centuries to come. Consequently, we should pay much more attention to educational links with India. I went to the university of Madras, which is one of the “Nehru five” universities. It is emerging on the world stage in terms of its research, including the number of patents that it files. Indian higher education is becoming a really important factor in the world.
I also want to pick up on the point made by my hon. Friend the Member for Cities of London and Westminster (Mark Field) that unless we maintain internationally competitive infrastructure, we will not remain internationally competitive in trade. I am afraid to say that the Government need to rethink High Speed 2. There is nothing wrong with HS2, but there is nothing right with it either. There are much better solutions to the transport problem. We need to think of a holistic approach, which incorporates connectivity right around the country and getting freight on to the railways, which in turn incorporates getting people out of their cars. Having internationally competitive infrastructure is really important.
We also need to think about trade barriers, both here and in India. When I was in India in 2008, there was no doubt that there were still considerable trade barriers in India for our legal services, accountancy services, insurance and banking. Everyone is quite right that, when Manmohan Singh comes to this country later this year, we need to erase those trade restrictions with his country.
Equally, we must retain our own trading competitiveness. There is no doubt that our immigration structures are problematic. I am not advocating to my right hon. Friend the Minister that we should join the Schengen agreement, but we must recognise it as a fact that is limiting our trade. Why did Huawei, which is now the second largest manufacturing company in the world, move its European headquarters from the UK to Dusseldorf? It was because of the Schengen arrangements. We must recognise the fact that we have a problem with our visa system.
Finally, I just want to say again that trade is vital to our country. If we are going to get out of the economic problems that we are in, we must reorient our trade with the rest of the world. Trade is good for our country, and for our companies as well. Between 1996 and 2004, companies that traded increased their productivity by 34% and the average figures for those companies that did not trade showed that their productivity decreased by 7%. There is an overwhelming and compelling case for trade. We need to have more of these debates, and this is an advanced bid for the Backbench Business Committee to consider having more debates on trade.
Mr Iain Wright (Hartlepool) (Lab)
It is always a pleasure to serve under your chairmanship, Mr Walker, as I did in the Education Bill Committee. My mother sends her regards. [Interruption.] That was a private joke; hon. Members would need to have been in the Education Bill Committee to understand it.
I congratulate the hon. Member for Wimbledon (Stephen Hammond) on securing this debate, which has been excellent. The contributions to it from right hon. and hon. Members have shown how important the economic, social and cultural links between the UK and India are. At the heart of our countries’ relationship is our close historic links. However, we should not look at the relationship too sentimentally. Instead, as we have done in this debate, we should assess how increasing trade with India could significantly boost income and prosperity for both countries.
Right hon. and hon. Members have mentioned the links between India and their own constituencies. For example, the hon. Member for Solihull (Lorely Burt) mentioned Jaguar Land Rover, and I will be pleased to meet representatives from the company later today. The hon. Member for Romsey and Southampton North (Caroline Nokes) mentioned the Solent India Business Network. In my constituency, we have Tata Steel, and that combination of Indian investment and Hartlepool skills provides steel pipes that are exported all over the world, are laid across the globe’s oceans and provide prosperity. The North East of England Process Industry Cluster has very strong links with the Indian chemical sector, and delegations have visited the north-east and India in recent years. A focus of this debate has been India’s huge potential, and as the global economy moves eastward, the potential for closer trading links with India should not be underestimated or overlooked.
India has emerged very resiliently from the global recession, with economic growth averaging at about 7.2% for 2000 to 2008, slowing only marginally since the world financial crash, to about 6%. The medium and long-term forecast is 8% to 10% per annum. As a result of a growing middle class in emerging markets, it is estimated that international trade and investment will expand faster than general gross domestic product, and that is particularly true of India where robust domestic demand, a high savings rate and a young population all play into the forecast that expenditure will rise fourfold in the next 20 years. We need to be at the heart of that. My hon. Friend the Member for Brent North (Barry Gardiner) said that although trade with India has become relatively more important to us in the UK, it is becoming less important to India. That point needs to be addressed, and I hope that the Minister will give a response.
The fact that India is a parliamentary democracy, with a mature civil service and an independent judicial system, should serve to reassure investors and exporters. One theme of today’s debate has been concern about corruption in India, which will compromise potential business investment, and I want to mention last week’s ruling by the Indian Supreme Court that Vodafone does not have to pay the tax bill on its acquisition of Hutchison Essar in 2007. My sense is that that demonstrates that the judicial system is independent of the Government, and that should help to provide a huge boost to foreign investors in India. It would be useful to get the Minister’s opinion on that matter.
The hon. Member for Wimbledon was particularly strong in saying that we should work to our competitive advantage. We are very good at exporting to India the likes of business and financial services, but we need to do a lot more because we are underutilising our potential. He was right in saying that we are very behind the curve when it comes to things such as construction services and exploiting the huge investment in infrastructure, in the road and rail networks that India will be providing. We need to do a lot more, and I hope that in his winding-up speech the Minister will say how we will broaden the range of export activities that we can provide to India, not just business and financial services but in the fields of construction, chemicals, science and infrastructure.
Mark Field
Another very important area, particularly given the common language—the official language in India is English—is intellectual property. Given the passion for sport, there is an opportunity to export premier league rights and other things. We are increasingly able to export a huge amount of animation and other UK products, not just to India, but to other parts of Asia.
Mr Wright
The hon. Gentleman is absolutely right about intellectual property, and I hope to come in a moment to the matter of legal services.
It has been almost a year since the Government’s trade White Paper was published, and the Opposition agree with its broad direction and rhetoric, particularly its focus on emerging markets. I suggest that that journey started under the previous Government and that the present Government are continuing it. In the White Paper, the Government stated that the conclusion of an EU-India free trade agreement was a top priority—a focus of today’s debate—and it was estimated that it would produce an additional €4 billion in trade by 2020. We agree that the successful negotiation of a trade agreement is important, but that negotiation has stalled. The White Paper stated that a conclusion was expected by the end of 2011, and I recall that when the Secretary of State for Business, Innovation and Skills made a statement to the House on the White Paper, he specifically mentioned the agreement and said that progress was being made—a fact mentioned by my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Brent North. Will the Minister update the House on when the free trade agreement negotiations will be concluded? Will they be concluded by 8 or 10 February? What will we see in the agreement? Will it be watered down to the point at which it is meaningless?
The White Paper also states that the Government will work towards a doubling of trade with India by 2015. This is a fairly dramatic objective, although laudable in its ambition, and I wonder precisely how the Government will help businesses to achieve it. That will be difficult, given that the most recent trade figures show a growing decline in exports to non-EU countries, including India. Moreover, the CBI monthly trends survey for December reports that export order positions remain well below long-run averages for the second month running. Companies are stating that present export orders above normal are plus 12, but those reporting below normal are minus 44. Given those concerning figures, will the Minister outline how the doubling of trade, which, as I said, is laudable, will be achieved?
Part of the solution is to encourage and incentivise as many British firms as possible to consider exporting their goods and services to India, but in doing that businesses face several problems, which have been highlighted today. The British Chambers of Commerce’s international trade survey found recently that 70% of small and medium-sized enterprises are not current exporters and are not likely to be in the next few years. I agree with the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) that we need to encourage and incentivise trade outside the EU to boost prosperity in our country. What will the Government do to help achieve that? What will the Minister do to address that issue, specifically with regard to India?
A potential barrier is the lack of appropriate finance for exports. The export enterprise finance guarantee scheme has been up and running for about a year now, so will the Minister update the House on how many businesses it has helped, and in particular how many businesses have benefited from the scheme in exporting to India, and the value of the goods in respect of our economy?
I want to talk about regulatory barriers to trade between us and India, particularly in relation to high-value professional services, such as banking, legal services and accountancy. As has been mentioned, we still await the liberalisation for foreign banks and the opening up of competition to foreign players. That could significantly increase British exports in this field, particularly in parts of India with no banking provision. What work are the Government doing, alongside the World Trade Organisation, to ensure that India’s banking system is opened up to competition? There is a similar position regarding legal services. It remains illegal for foreign lawyers to practice law in India, and it is proposed to address that issue in the EU-India free trade agreement, but will the Minister say something about the work being done to come to some agreement on the provision of legal services?
In my profession of accountancy and auditing, there remains a restriction on the ability of global accountancy and consultancy firms, many of which are based in Britain, to use their brand names for auditing and accountancy purposes. The Institute of Chartered Accountants of India has negotiated a memorandum of understanding with the Institute of Chartered Accountants in England and Wales, of which I am a member, which allows members of one body to join the other in certain circumstances. That should boost trade between the two countries. It should provide regulatory and auditing rigour, which should improve corporate governance and reporting, and therefore reassure investors, which in turn would help the Indian market to grow. Given our expertise in knowledge-intensive industries, we have huge potential here, but it would be useful to hear more from the Minister about how he intends to facilitate such growth.
The hon. Member for Cities of London and Westminster (Mark Field) said that we should be a beacon for the brightest and the best, and that brings me on to student visas. I am very pleased that my right hon. Friend the Member for Leicester East (Keith Vaz), the Chairman of the Home Affairs Committee, is here. We have a huge reputation in higher education, but there is a perception that student visas are somehow a barrier and that we are somehow closed for business. Will the Minister outline the discussions that he has had with his counterparts in the Home Office about how that will be addressed?
Close historic and social links have the potential to grow into equally close and mutually beneficial investment, commercial and trading opportunities. We welcome the scope for more Indian direct investment into the UK, while wishing to see our exports grow to ensure that India becomes a more significant partner. Given the strength of feeling and the backing of Members in this debate, I hope that the Minister will be able to outline how UK-India trade will grow still further.
The Minister for Universities and Science (Mr David Willetts)
This has been an excellent debate. I congratulate my hon. Friend the Member for Wimbledon (Stephen Hammond) on calling for it and on opening it so effectively.
The Government absolutely recognise that trade between Britain and India is vital as we seek to rebuild and rebalance our economy at home. We are committed to ensuring both that the UK remains a top destination for foreign direct investment and that our businesses engage properly with high-growth emerging markets. As several hon. Members have said, there can be no better example of a high-growth emerging market than India. My hon. Friend put it particularly well when he said that we should not be complacent, because contracts are not won but worked for. We should all remember that motto.
The British Government are therefore committed to making our relationship with India broader and deeper, and that certainly includes the trade area. That commitment was clear in the Prime Minister’s decision that his first major overseas visit should be to India, with a delegation of Ministers, including me, and senior business figures. The Prime Minister has made it clear to us that that was not a one-off but part of a process of continuing engagement with India. Indeed, I have been back on two further missions since then involving trade, universities and research.
I welcome the intervention by my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes). She mentioned the Solent India Business Network and the university of Southampton. I can report to the House that I took with me a gift for my Indian opposite number. I remembered that the university of Southampton, as my hon. Friend knows, holds the archive of the Mountbatten papers, including the papers from the negotiations with Gandhi on Indian independence. We politicians are sometimes accused of writing our ideas on the backs of envelopes. The archive includes documents from the period when Gandhi was negotiating with Mountbatten. He had made a vow of silence, so he was not speaking directly to Mountbatten, and I can report that he did indeed write his proposal for the future of India on the back of used envelopes. I took copies to give to my Indian opposite number.
We have historic ties, but this debate has rightly focused on our trade relationship. The British Government are clear that we aim to double trade with India by 2015. That is our objective. To achieve it, we must offer more help to small and medium-sized enterprises to export. We still have an insufficient number of SMEs in the export business. We must help our companies win major, high-value contracts. We need to attract much-needed inward investment, which builds trade links, and to build strategic relationships with key companies. The hon. Member for Solihull (Lorely Burt) made an effective case. We recognise fully that Jaguar Land Rover is a classic example of a key company.
We focus on India not just because we understand its high growth prospects in the abstract but because we have analysed particular sectors where we can see that growth happening. India plans to spend $1 trillion over the next five years on improving its infrastructure. That is a market. It is expected to be the world’s third largest car market by 2020; that is another crucial opportunity. Its health care market is expected to triple to $150 billion by 2017.
Several hon. Members have mentioned my particular responsibilities. The Indian Government have plans for 40 million extra university places and for 500 million more people to receive vocational training over the next 12 years. When I have had discussions with Kapil Sibal and other Indian Ministers, they have recognised fully that to achieve those extraordinary ambitions, they must work with others. Who better to help them than Britain, given our strengths in education and vocational training?
Mr Willetts
The British Government have a shared view, to which, of course, all Departments subscribe. Included in that, as I said, is the fact that there is no limit on the number of suitably qualified foreign students who can come to legitimate universities. However, I fully accept the challenge of communicating that effectively, given how the policy has sometimes been reported, not least in the Indian media. One reason why I have paid visits to India is to communicate as clearly as I can that there is no numerical limit on legitimate students coming to legitimate higher education institutions.
Mr Willetts
I am terribly sorry, but I have only five minutes left, and I have several other issues to touch on.
One issue raised by several Members involves the problems that a number of UK companies have experienced obtaining payment for goods and services provided during the Commonwealth games. Some UK companies, most notably SIS LIVE, are alleged to have been involved in instances of bribery, which they have strenuously denied. Several hon. Members have vouched for those companies in this debate. All those cases are being examined by the Indian Central Bureau of Investigation. Until that work is complete, we doubt that any resolution of the matter is possible. All the Commonwealth games cases have been handed over to a group of Indian Ministers, who will decide what needs to be done.
I assure hon. Members who have raised the matter that the British Government are energetically pursuing the concerns of British companies with the Indian Government. The high commissioner met the Indian Secretary for Home Affairs and followed up with a letter. Our Prime Minister has written to Prime Minister Singh about the outstanding payments, and Ministers and officials are working to resolve the outstanding issues. My right hon. Friend the Secretary of State for Culture, Olympics, Media and Sport has written to his Indian counterpart, the Minister for Sport, requesting that the investigation be expedited as quickly as possible. We remain very much engaged with the issue.
Mr Willetts
I apologise, but it has been a crowded debate. We understand the arguments made by my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) for more debates on these issues.
I was asked about the EU-India free trade agreement, including by the hon. Member for Hartlepool (Mr Wright). The UK has been one of the strongest supporters of the FTA since negotiations started. We believe that there is now a genuine prospect of concluding an ambitious agreement this year that will deliver significant benefits to UK business, with a potential value of £2 billion over 10 years. We now look forward to the EU-India summit in February, to which several Members have referred, and hope that progress will be made there.
We have made it clear throughout the negotiations that in order to conclude an agreement, it is essential for India to open up markets in key areas such as services, wines and spirits and the automotive sector, which the hon. Member for Solihull mentioned. India’s implementation of reform in single-brand retail is a positive sign, but we need more progress on services including multi-brand retail, banking and insurance.
Some Members asked what that will mean for migration. We expect the chapter on international trading services in the FTA to include provisions on the temporary movement of highly skilled professionals from India to the UK and from the UK to India. We recognise that a key element of the UK’s offer in trade negotiations is its willingness to admit temporarily to the EU highly skilled professionals under mode 4. However, any such measure must be consistent with our commitment to limit levels of economic migration to the UK. We expect the outcome of the negotiation with India to allow for the operation of minimum salary thresholds and wage parity testing. The Government are strongly committed to policy in that area.
In conclusion, the British Government absolutely agree with hon. Members from all parties about the importance of our relationship with India. That is why the Foreign Secretary has announced the expansion of our network across India, creating 30 new positions. It is a truly cross-Government effort. Our relationship is much wider than trade and investment; we co-operate closely with India on education, science and research. The UK India Education and Research Initiative has now reached a scale of £90 million, and I have launched improved research collaboration with India. We are also researching and working together on climate change and development. We have an increasing defence and security relationship, and we are working with India on international issues.
Despite the global downturn, India continues to enjoy rates of growth that are the envy of Europe and the US, with the north Atlantic problem to which an hon. Member referred. We will continue to work across Government and with the private sector, universities and our Indian friends. We want more UK companies to do business in India, and we welcome those opportunities.