Stereotyping and fears over jobs hamper British firms in India


British businesses are falling behind the U.S, Europe and the Far East in the race to invest in India's fast-growing economy, an influential group of politicians has warned.

A report by the House of Commons Trade and Industry Committee has concluded that Britain's unique relationship with India should be generating a much higher level of trade and investment than is actually the case.

The MPs found that UK firms had only a partial understanding of the Indian economy despite it becoming the fourth largest economy in the world with the second largest population of 1.1billion.

Their report said many UK companies viewed India merely as a source of low-cost labour rather than as an emerging market in its own right.

MPs were also concerned that employer's perceptions of India had been seriously distorted by the media's focus on the perceived threat to jobs from outsourcing, particularly call centres.

A view had been created, which was not the case, that these centres were the dominant feature of the Indian economy.

There were, in fact, among others, considerable openings for investment within the manufacturing and automotive and aerospace sectors and vast opportunities for the UK's higher education sector, said the politicians.

The committee's report urged UK companies to become more vigilant if they were to take full advantage of India's fast liberalising economy.

Committee chairman Peter Luff said: "Levels of interest in the Indian economy are growing year upon year – but UK investors don't yet really understand the opportunities that India presents.

"If we are to take full advantage of this golden opportunity, UK firms must reassess their perception of the Indian economy as simply a source of low-cost labour and the UK Government must do more to help them," he added.

According to the report, real gross domestic product growth in the Indian economy was 8.5 per cent for the financial year ending March 2004, 7.5 per cent for the year to March 2005, and 8.4 per cent for the year ending in March 2006.

The Indian middle class is forecast to grow to around 200 million people in the next 15 years, it added.

In 2004/05 Britain was India's fourth largest good trade partner, with 4 per cent of India's world trade in goods, after the U.S, China and Belgium, it concluded.

But the Confederation of British Industry and the British Chambers of Commerce (BCC) both rejected the criticism.

"Businesses are fully aware of the opportunities in India and other parts of Asia," said David Frost, the BCC's director general.

"British businesses have seen exports reduced in recent years as the Treasury switched its focus to encouraging inward investment. The Government has refocused the reduced remaining support away from existing exporters to new export firms who may favour markets closer than India."