UK-based businesses must raise their game in India, argues Toby Greenbury of the UK India Business Council
As India returns to annual growth rates of 8-9%, the immediate future for the West looks, by contrast, pretty gloomy.
In the UK recovery is weak and the next several years will be a long hard slog. With the economy barely escaping the clutches of recession, the UK can expect to face more pain with the uncertainty of a general election on 6 May, but the certainty that whatever the result, government spending will be cut savagely and taxes will rise. Industrial action may well add to the misery. It is already making headlines and spoiling holidays.
It all makes the jovial comments made by Kamal Nath, India’s minister of road transport and highways, look prescient. Speaking before the financial crisis, in his former role as minister of commerce and industry, Nath referred to “emerging economies”, on the one hand, and “submerging economies” on the other. It was a light-hearted joke at the time, but it feels a little close to the bone now, particularly to those in the UK.
Despite the unfavourable comparison, India’s success – and that of some other emerging economies – presents remarkable opportunities for UK-based businesses at a time when many of their traditional markets remain sluggish. Indeed, the UK, which has so much in common with India, is in a terrific position to benefit from its economic growth and increasing openness to the world of cross-border transactions and foreign investment.
In spite of this, there is a huge amount to do to ensure that UK-based businesses – particularly small and medium-sized enterprises – understand the opportunities available and move to take advantage of them. The statistics for trade and investment between the UK and India make disappointing reading, especially so given the special relationship between the two countries. Many other countries, most obviously Germany, are winning very substantial India-related business even though they started from a far less auspicious position.
This is all despite the strenuous efforts of such organizations as the UK India Business Council, which is substantially funded by the British government, and UK Trade and Investment, a government body, which have tirelessly sought to encourage a larger number of UK-based businesses to trade with, and invest in, India.
Lawyers normally follow their clients into different countries and areas of business. But UK law firms, especially those serving the mid-market sector, were notable by their absence from the Indian market during the 1990s and the first half of this decade. Fortunately this position has now changed. UK-based law firms have finally woken up to the excitement surrounding India’s potential as an untapped destination for Western business. While in 2006 or so, only a handful of UK law firms were seriously involved in India’s mid-market, today almost all of the top 100 UK firms have an India group. The numbers have actually grown faster than the volume of work. As a result, until market forces take their toll, or until trade and investment between India, the UK and the rest of the world develops significantly, there will not be enough work to go round. In the meantime there will be intense pressure on legal fees, which will undoubtedly be good news for clients.
If only these lawyers – who for once have taken the lead and entered a market before the majority of their clients – could spread the word and educate and encourage UK-based businesses to look at India more strategically.
The next 10 or 15 years will see many emerging markets playing a game of catch-up. As they gain speed and their economies expand, there will be an enormous appetite for Western technology, know-how and expertise, as well as increasing demand for Western brands and goods and services.
Over the next several decades, India will desire and require what UK-based businesses have to offer across a huge range of products, services and technologies. If the UK fails to satisfy this demand, someone else will. The UK must therefore leverage its unique position to power inward investment into India.
In addition there will be tremendous openings in the West for Indian companies, including many exciting opportunities for mergers and acquisitions. The EU, for instance, may struggle for several years, but is nevertheless a substantial and rich market that Indian businesses will seek to penetrate as they flourish and gain greater self-confidence on the world stage. The alternative investment market (AIM) of the London Stock Exchange, and similarly medium-sized companies in which private equity funds have invested and are looking for exits, represent a pool of potential acquisitions. If Indian investors play their cards right, they can make acquisitions that will afford them access to the EU market, a pathway to local management and access to brands, technology and know-how.
Terrific opportunities exist for synergies between the UK and India. Fuelling relationships in both directions will help revive and bolster both economies considerably.
Now is the time!
Toby Greenbury is a director of the UK India Business Council and co-head of the India group at London law firm Mishcon de Reya.
Photo © Mishcon de Reya; Used with permission. All rights reserved.