Cameron hoping to forge new special relationship with visit to India

When David Cameron stands on the grounds of India's best-known IT company this week and makes his pitch for building a "new special relationship" between Britain and India, he will no doubt have in mind the thoughts of a previous visitor to the Infosys campus.

It was after visiting the Bangalore headquarters of the IT pioneer that the Pulitzer-winning author, Thomas Friedman, came up with both the idea and the title of his book, The World is Flat. The idea contained within his treatise on the globalised economy was that in the interconnected business world of the 21st century, all players were equal. India, in particular, had lots to offer.

As he launches the Government's flagship foreign policy initiative, the Prime Minister will hope to develop a more fruitful relationship with a nation that has an economy growing at almost 10 per cent a year and which offers huge potential for trade and investment.

For Mr Cameron, it is personal as well as business. The change in foreign policy is very much his pet project, not something cooked up by mandarins. He was converted during a visit to India in 2006, his first overseas trip as Leader of the Opposition. He believes – and some politically neutral British officials agree – that the previous Labour Government put too many eggs in China's basket and got little in return, while paying lip service to the world's largest democracy, India.

Mr Cameron will take personal charge of Britain's relations with India, leaving Nick Clegg, the Deputy Prime Minister, to develop links with China. Looking east is also a deliberate shift from what Mr Cameron sees as Labour's obsession with the "special relationship" with the United States. The US is forging new links with the world's fast-growing economies, so Britain must do so too, Mr Cameron believes.

India is a logical partnership: it shares a 250-year history with the UK, has a large English-speaking population and already has close ties as a result of emigration and educational placements.

Mr Cameron is taking an unusually high-powered delegation including six cabinet ministers and about 60 businessmen. He will be accompanied by William Hague, the Foreign Secretary; George Osborne, the Chancellor; Vince Cable, the Business Secretary; Jeremy Hunt, the Culture Secretary; David Willetts, the Higher Education Minister and Greg Barker, the Climate Change Minister.

Several business deals are likely to be announced during the visit – including a £500m order for Hawk jets from BAE Systems. Richard Olver, the chairman of BAE, will be in the delegation, which will also include Richard Lambert, director general of the CBI; Sir Martin Sorrell of WPP; John Varley of Barclays Bank; Gerry Grimstone of Standard Life; Peter Sands of Standard Chartered; Sir Anthony Bamford of JCB; Sir John Banham of Johnson Matthey and Vittorio Colao of Vodafone. Britain wants India to open its doors to banks, legal and insurance firms and small manufacturers; in return, India will ask for mutual recognition of qualifications so that its lawyers and bankers can operate in the UK. Privately, British companies complain about Indian bureaucracy and even alleged corruption, although Mr Cameron is not going to shout about that. A business taskforce is likely to be set up to ensure the high-profile visit is not a one-off, quickly forgotten mission. The aim will be to break down barriers to trade.

The most attractive prize in a country with a growing consumer class is the retail market. At the moment, this sector in India is worth around £227bn and is forecast to grow to £352bn by 2014. Yet a full 90 per cent of that trade is unorganised and the potential opportunities for companies such as Tesco and other retail giants are vast.

Mr Cameron will hold talks with Manmohan Singh, the Indian Prime Minister, and the Indians will lay on a banquet for him at Hyderabad House, the splendidly ornate Lutyens-built palace in the centre of Delhi that was once the residence of the last Nizam of Hyderabad. Mr Cameron will be looking to increase Indian investment in the UK, seeking to attract more Indian students to British universities and to halt the slide of British influence in India.

Six decades after India won independence from Britain, the two countries already do plenty of business. According to official figures, in 2009 total bilateral trade was worth £11.5bn, with UK exports to India totalling £4.7bn and £6.8bn of Indian exports to Britain.

India is the fourth-largest single investor in Britain, while British investment in India lags behind Singapore and the US. There are 40,000 Indian students in the UK. The Government, under fire from Labour for having a cuts agenda but no growth strategy, wants to secure as much business as possible from India.

But the historic links bring problems as well as opportunities, UK officials admit. Previous British politicians have been accused of patronising their hosts, and in today's world the UK arguably needs India more than India needs it. And India is gravitating towards the US. Trade between India and the US, at £36bn, is three times the level with Britain and there are more than twice as many Indian students in America than in the UK.

America welcomes India's entrepreneurs with offers of residency rights for creating jobs, while in London the Government is imposing a cap on immigration from outside the EU. "There is a contradictory message to some extent," said Jo Johnson, the Tory MP for Orpington, brother of London mayor Boris Johnson and formerly the Financial Times bureau chief in Delhi, who will accompany Mr Cameron. "The big problem in the [UK-India] bilateral relationship has been a tendency to think, okay, we do the big high-profile visit, we announce some more or less incredible trade targets, we all go home and there is no follow through."

Gerwyn Davies, public policy adviser at the Chartered Institute of Personnel and Development, warned that the immigration ceiling would hit Commonwealth countries like India. "Now is not the best time to impose a cap, because we need those workers to consolidate and strengthen what is already a fragile economic recovery," he said.

What can Britain offer India? There will be closer links between universities, sports and cultural bodies in the two countries, and an offer of help on security for the Commonwealth Games, which take place in Delhi in October.

India's politicians are likely to appreciate the size of Mr Cameron's entourage and the fact that he has made India one of his first foreign trips since becoming Prime Minister. He will keep out of the dispute between India and Pakistan over Kashmir and remain neutral in their wider power struggle. A nightmare scenario for the West is that Afghanistan eventually becomes the battleground for an India-Pakistan conflict.

Yet there is plenty of scope for Mr Cameron to get things wrong. He will be well advised to avoid the mistake of referring to his senior south Asian hosts by their first names, as the then Foreign Secretary, David Miliband, did in a visit in January 2009. Diplomats still cringe at the memory of Mr Miliband's poorly-researched attempt at bridge-building when he referred to "Manmohan" and "Pranab" [Mukherjee, the then Indian foreign minister].

Mr Cameron is expected to confirm that British aid to India will be cut. In the three years to 2011, the UK would have provided £825m to India, a nuclear-armed nation with a space programme and an overseas aid budget of its own worth as much as Britain gives it. While defenders of the aid package point out that at least two-thirds of Indians live in utter poverty – a damning indictment on India's political classes since independence in 1947 – the International Development Secretary, Andrew Mitchell, has warned such a grant may have to be scaled back.

Indian business believes Mr Cameron and his hosts will have much to talk about. BG Srinivas, a senior Infosys executive based in London, said there is scope to expand the bilateral relationship: "There are lots of ways that the UK can expand into the Indian market – IT, pharma, telecommunications. In India there are also lots of centres of expertise." As for increased Indian investment in the UK, he said: "The US is equally attractive, and larger. But within Europe, the UK stands out."

The issues at stake

*Trade The Prime Minister is keen to build a relationship with a country where the economy is growing at almost 10 per cent a year and offers a likely growing market for British exports. Indian exports are greater to the UK.

*Visas Employers in the UK, and many Indians, complain that British visa restrictions need to be eased, to allow them to bring in workers.

*Students The many youngsters seeking an overseas education represents a rich prize for fee-seeking universities. Australian, US and British educators have headed to India in recent years to encourage India's brightest to head to their shores.

*Security Britain and India have shared security concerns, particularly in Afghanistan, where Britain is deeply committed and where India is wary of its longtime foe, Pakistan, increasing its influence.

*Burma Mr Cameron's visit comes soon after Burmese military leader Than Shwe arrives to deepen trade with India.

The expert view: 'India sees the US, not Britain, as its key partner'

Sir Mark Tully, Former BBC Delhi bureau chief.
Born in Calcutta, 1936, to British parents. Lives in Delhi.

The balance of power these days lies with India. India has the markets that Britain wants to get into and is also the country Britain is anxious to collaborate with on the terror front and relations with Pakistan.

India is delighted that Britain is showing all this interest but Britain shouldn’t be too seduced by the welcome Cameron is likely to get. It shouldn’t think the old days of the Raj are back.

India doesn’t see the relationship with Britain as the special relationship. India is much more anxious about its relations with America – partly it’s a question of trade, but also India thinks America can put much more pressure on Pakistan.

One of the things that Britain could do, and is doing with this visit, is to show that it has respect for India, to show it acknowledges India’s potential and ambition. The other thing that Britain could do, but I can’t see it being done, is to come down heavily on India’s side with the problems with Pakistan.

One thing Britain should not do and which Robin Cook did in 1997 is to offer to mediate between India and Pakistan. India is absolutely opposed to mediation, Pakistan wants mediation. Offering to mediate would be seen as favouring Pakistan.

In the future India’s economy should be much bigger and India will be a much bigger country. It might become more inmportant than Britain if everything goes well with India. But India faces huge problems that are still to be overcome. They can be summed in fact that a recent survey has shown that in eight of India’s most backward states there are more extremely poor people than in 26 African countries put together.

The fundamental problem is this economic growth isn’t trickling down as it’s meant to. If India doesn’t deal with the problem it’s likely to have the most enormous difficulties. If the young Indians feel they are being bypassed, if they feel they aren’t benefiting, then it could have really widespread social problems.

Sir Gulam Noon, Businessman and manufacturer of Indian food products.
Born in Bombay, 1936. Lives in London.

David Cameron is absolutely right to want a special relationship – we do a lot of business in India, and Britain is getting a lot of inwards investment from India. We have such strong historical links and we have never yet fallen apart in our relationship – as far as I can recall relations have only really been strained when India exploded the atomic bomb.

More and more British companies are happy to go to India to open plants and other facilities. India is a country where English is spoken – so there’s no problem in communication – and it’s a democracy. A businessman going from Britain will be very comfortable where the jurisprudence is so exactly like Great Britain’s. That gives a lot of confidence.

Rajesh Suri, Chief executive of the Michelin-starred restaurant Tamarind.
Born in Punjab, 1961. Lives in London.

Britain will be able to secure Indian investment, which Labour succeeded in doing. But the Government needs to balance that with allowing people in to the country too.

For Indians, the main reason to come to the UK is that London is the hub of Europe: you come here to get nearly anywhere else. People find it easy because of the past relationship, the language and the fact that the British like Indian culture. This country also has the largest Asian community in Europe.

We need to attract foreign investment but highly qualified people find it difficult to come and work here. As the CEO of a company I think it should be easier to bring people in from abroad – the Indian restaurant industry contributes six or seven billion pounds but is penalised because it can’t recruit enough chefs. That impacts on many more people’s jobs.

India has such a large economy – in the future the relationship will have to be more give-and-take if it is to work.