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Gareth Thomas MP, Former Minister for Trade, Development and Consumer Affairs (jointly with DFID)
Cinnamon Club, 30-32 Great Smith Street, London, 11 February 2009
For the past decade, India has been a nation on the move.
Fuelled by economic liberalisation, India’s remarkable growth has empowered a new and growing consumer class and helped lift millions of its citizens out of poverty.
Politically, it is taking its rightful place in the global arena and will be a key participant at the London Summit in April.
Despite the tragic events in Mumbai last November, UK business is as committed as ever to strengthening their links with India and building on our centuries-old commercial bond.
Lord Mandelson’s visit last month was indicative of this – 200 UK companies participated with the specific aim of enhancing their engagement and relationship with the new India.
As I said earlier, there’s a tough year ahead.
It’s tempting when global economic conditions seem so uncertain to consolidate business activity and retreat to the domestic markets we know best.
We must not!
The credit crunch is going to shape the mindset of a generation of politicians and business people - in India and the UK.
If we in the globalised economies draw the wrong conclusions, especially about the need for open trade and globalization, we could turn a downturn into something longer and significantly worse.
The pressure to reach for trade barriers or other forms of protectionism is all too strong.
But we need to think internationally, even as we act nationally.
This should extend to coordinating fiscal stimuli as much as possible.
The outcome of India’s growing openness has been a growing economic prosperity that has and will continue to transform lives for the better.
However extending the benefits of India’s emergence as a global economy to address Indian poverty remains a huge challenge.
That the Indian government remains committed to liberalisation of its financial, legal and accountancy sectors is to be welcomed – a message reinforced by Kamal Nath to Lord Mandelson only last month.
It will be an important contributor to attracting the foreign investment India needs for its large infrastructure projects.
Also the expansion of Indian manufacturing, which the government rightly sees as central to defining India’s future place in global value chains, will be built on the further opening up of the Indian market to industrial imports.
Even assuming that the political case for openness will prevail, we are still faced with the huge challenge of global economic governance.
The credit crisis has finally removed any doubt that we need to rethink the way in which we coordinate internationally in governing the global economy.
Getting that right obviously means reflecting the way the economic world actually works.
The real significance of the G20 meeting in Washington last November was, I believe, that India was there. As chair of the group for 2009, the UK will be ambitious.
The London Summit will aim to win agreement on the principles, priorities and process for an ambitious agenda to strengthen the global financial system, reform the World Bank and the IMF and ensure that the global trading system remains open.
The new global economic order will be shaped by India and China, as much as elsewhere.
How well we prepare global institutions for that new order will define how well they can work.
There are huge challenges.
Quantifying just what the developed world and the emerging economies can legitimately expect from each other is a political minefield.
We cannot however allow the G20 process – or indeed the Doha Round, or the Bali climate change agenda - to stall or suffer from lack of focus because we cannot answer them.
The twin agendas – defending global economic integration and working together to renew the institutions that govern globalization – should unite India and Europe, and India and the UK.
Back in 2007 Kamal Nath and Lord Mandelson launched a free trade agreement negotiation between the EU and India.
Precisely because we believed that closer economic openness between India and Europe is in the long term interests of both sides.
Europe can be a source for the industrial goods that will drive India’s own manufacturing boom.
As with the wider Doha Round, the downturn does not reduce the value of a bilateral trade deal, it raises it.
The EU and India should call the deal what it would be – a confidence-building economic stimulus package - and sign it before the end of the year.
For UK companies to maximize their potential for success in India they need to grasp that the Indian market today is not the market of ten years ago.
They need to engage with the entrepreneurialism that is flowering outside of the big metros such as Delhi and Mumbai - in emerging regional cities like Pune, Hyderabad and Bangalore.
In particular UK manufacturing companies need to look for joint ventures and partnerships in India’s growing industrial sector as it moves up the value chain.
In turn the UK offers huge opportunities for Indian companies looking overseas for the first time and seeking a launch pad for going global.
As I mentioned at the reception, this government is committed to raising our game in assisting British Business to grasp the opportunities that India has to offer.
As well as encouraging Indian companies to grasp the opportunities that Britain has to offer.
We have increased UKTI’s resource in India; established the UK India Business Council.
And are now currently recruiting 4 private sector specialists in ICT, life sciences, energy and advanced engineering to work with India and China based companies to identify opportunities for hundreds of UK businesses in these areas.
And now of course we can now welcome the All Party Group into that fold.
Particularly for the unique contribution they will bring to the engagement and understanding of the India UK trade and investment relationship and its challenges.
Thank you for the opportunity to speak and I look forward to the discussion over dinner.