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16 November 2015
Modi in the UK
David Cameron's Oxfordshire-accented Hindi said it all. 'Acche din zaroor ayengey' (The go...
© Brunswick Group 2015 | 2
announced his government’s intention to issue a rupee-denominated bond in London to raise
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Narendra Modi’s visit to the United Kingdom

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An overview of Indian Prime Minister Narendra Modi’s visit to the United Kingdom.
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Narendra Modi’s visit to the United Kingdom

  1. 1. 16 November 2015 Modi in the UK David Cameron's Oxfordshire-accented Hindi said it all. 'Acche din zaroor ayengey' (The good days will most definitely come), the UK prime minister told 55,000 exultant British Indians at a rally for the visiting Indian prime minister Narendra Modi, in Wembley, London. Mr Modi's own attempt at humour in a foreign language lost something in translation: the 'bonds' that tie India and UK, he said in precise English, include Brooke Bond, the tea brand owned by Unilever, James Bond, a thin connect, surely, and now the first Rupee Bond, announced days earlier. It works better in Hindi, really. Mr Modi's three days in the UK were a triumph sandwiched between gloom. He arrived from a thumping defeat in a critical election in the northern state of Bihar (Population: 100m) and left amid horrors unfolding in Paris. In between was relief: this son of a tea-seller soaked up the lavish hospitality of the British establishment. In turn, Mr Modi did what he does so well: working crowds of business-people and an adoring Indian diaspora. There is clearly personal chemistry between the two leaders, evident in the warmth of their exchanges, as well as the obvious fun Mr Cameron has in mixing it up with British Indians: at Wembley, Mr Cameron, with his wife Samantha dressed in a stunning purple sari, was on awesome form. For Mr Cameron, this was also another turn in his mercantilist courtship of India. Mr George Osborne, Chancellor of the Exchequer, and a fellow believer, wrote: “our economy is still too dependent on our traditional markets in Europe and America... if we are to succeed, we need to link ourselves more to the fastest growing parts of the world.” Mr Modi told CEOs at the Guildhall in London, that as the largest and fastest growing democracy in the world, "if your business isn’t already in India, at this point of time, it is wiser to be in India”. Yet the pomp of these government to government occasions is, according to the Financial Times, different to realities on the ground. With the exception of export industries directly controlled or regulated by governments, "it is the interaction of businesses in the marketplace, not exhortations by ministers, that creates strong and durable flows of commerce," the FT remarked. The reconstitution of a UK-India CEO forum, announced last week, is a small step in that direction, putting the onus on business to identify and build ties between the two countries in six key areas, including infrastructure, clean energy and financial services. Chaired by Sir Gerry Grimstone (Chairman, Standard Life) and Mr Cyrus Mistry (Chairman, Tata Group) on the UK and Indian sides respectively, the group is packed with big names from UK business (HSBC, BP, Diageo, RB, among others) and Indian industry (including Tata, HDFC Bank and Wipro). Despite the FT's reserve, commercial attachés from both sides had done their preparatory work for this trip, and the outcome, announced on November 12, was a clutch of commercial deals between British and Indian companies worth more than £9 billion across industries including energy, IT and cyber, healthcare, retail and education. The deals involve British companies that are new to India, including Holland & Barrett (in partnership with Apollo Hospitals), which plans to open 1,000 outlets over the next five years in India, and Merlin Entertainments, which will open the first Madame Tussauds on the sub-continent, in New Delhi in 2017. For the UK, it was financial services, where London’s continued pre-eminence as a global financial hub shone through, with the announcement that India's HDFC, Bharti Airtel and Yes Bank would issue so-called ‘Masala bonds’ totalling about £1 billion on the London market. Mr Modi also
  2. 2. © Brunswick Group 2015 | 2 announced his government’s intention to issue a rupee-denominated bond in London to raise funds for the expansion of India’s enormous but creaking railway network. For British companies already in or considering expanding in India, however, judgements will swing on their confidence in a country that remains extraordinarily difficult to read; Mr Modi's political vulnerability after his defeat in Bihar adds to the complexity. Yet the enduringly complicated shape of Indian politics was still overshadowed by equally long- standing gripes from business, all aired at private round tables alongside the affairs of state. Making India an easier place in which to do business topped the grumbles, captured by Sir Gerry Grimstone’s urging to do “multiple little things” to make the big picture work. An increase in the FDI threshold in insurance and, more recently, the announcement of the removal of some barriers for foreign investors in 15 sectors, including defence, single-brand retail, construction and media, partially addressed concerns on the pace of reform. For his part, Mr Modi continued to advertise his ‘Make in India’ initiative to turn the country into a global hub for manufacturing. That remains fanciful, in part because investors remain spooked by his government's hesitancy in unambiguously reversing retrospective taxation of the type hanging over Vodafone – which nevertheless committed a further £1.3 billion in new investment into India last week – and its failure to secure the passage of laws on land acquisition and the introduction of a national sales tax, now further delayed. Both are victims of messy parliamentary tactics even though there may be underlying consensus: everyone agrees, for example, that the national sales tax in its current form will be a boon. The upper house of parliament, where Mr Modi's hopes of gaining a majority were set back with the electoral defeat in Bihar, remains an elusive prize, and so, too, is further legislative reform. Yet there is a clear counterpoint to the doom that comes from a reading of political commentary out of India. With the IMF forecasting India’s growth at 7 per cent plus next year, there is genuine opportunity in India on a scale that is matchless in the free world. As a next step, Mr Modi may wisely choose to curb his foreign travel (30 overseas trips since May 2014), and spend more time at home to address justifiable outrages over the humiliation and treatment of minority communities by a bellicose wing within his party. Liberal British media, and isolated street protests in London, reminded Mr Modi of the fact. Mr Modi convincingly won the general election in May 2014, on a platform of development, growth and jobs. On announcing the bilateral deals, Mr. Cameron proudly said that as the largest investor in India among the G20 alliance, British businesses were already supporting nearly 700,000 jobs in India. Mr Modi's entire thinking on reviving the economy leads inexorably to jobs and the one million young Indians who join the labour market each month. They want work, there aren't sufficient jobs being created, and so this so-called demographic dividend may vote with their feet. That is a chilling message - in anyone's language. About Brunswick Group Brunswick is an advisory firm specializing in critical issues and corporate relations. Founded in 1987, Brunswick is an organically grown, private partnership with 23 offices around the world. Contact Khozem Merchant Azhar Khan Partner, Head of India Director, India +91(0)9820060485 +91(0)9167883290 kmerchant@brunswickgroup.com akhan@brunswickgroup.com