David Cameron and the UK delegation?s visit to India has been the topic of many column inches in recent days. In the UK, the commentary has been pessimistic, ranging from questions about whether there is still anything to gain from emphasising historical ties when it?s really just a euphemism for colonialism, to questions about whether this desire to make nice with India heralds the ultimate decline of British power and the rise of the new powers of Asia, to speculation about whether the trip is just a distraction from the tough domestic policy issues that are currently being faced in the UK.
While this is a slightly biased characterisation of the coverage of the trip, some of the commentary has been unduly pessimistic. Practically speaking, there are three main areas in which increased trade would be mutually beneficial. First, there is high-tech manufacturing. Second, there is the much-derided financial services industry. And third, there is a huge opportunity in media and communications.
In the UK, firms such as Rolls-Royce and BAE systems already have significant and deep technological bases, and organisations such as the National Endowment for Science, Technology and the Arts have been issuing reports encouraging the UK to rebalance its economy towards high-tech manufacturing. In India, technology services and outsourcing firms have been moving in the direction of high-tech manufacturing, and are now participating in the creation of key infrastructure such as supercomputers. There are also examples of traditional engineering firms making the transition towards more technologically innovative products. (A good example is the Bharat Forge and KPIT Cummins plug-in, which ?hybridises? petrol-engined cars in literally two hours.) It?s not just a matter of technology transfer in one direction, since India has developed world-leading skills in generating robust, low-cost technology that is extremely valuable in emerging markets. It?s also not just about opening up Indian markets to British firms, since there is the possibility of real collaboration on the creation of technology, opening up global markets to Indo-British ventures.
Financial services have taken a severe beating recently and the UK has become the world?s favourite whipping boy because its economy has been tilted towards this. It?s worth pondering two things. First, India might take the (to my mind incorrect) lesson that the recent crisis has shown us that financial innovation is not worthwhile. This may be true for excessively complicated financial instruments (economists Xavier Gabaix and David Laibson present a very believable model in which sophisticated consumers of complicated products are essentially subsidised by the unsophisticated). But the experience of the recent crisis should be tempered by the wealth of evidence linking levels of financial development with economic growth. India?s burgeoning middle classes and credit-constrained firms could use some help connecting with one another.
Second, London has been a financial centre for virtually as long as it has been in existence, and a centre of world commerce since 1st century AD, when the Roman historian Tacitus wrote of the town as filled with negotiatores (roughly, traders and brokers). Technology transfer from the world?s leading international financial centre to help with Mumbai?s aspirations in that direction would be welcome. And there?s plenty of icing for London financiers struggling with anaemic European growth rates.
Finally, media and communications represent a huge potential growth area and one in which I believe India can take the lead. The political scientist Joseph Nye famously coined the phrase ?soft power? to describe the ways in which culture could be used to increase a country?s influence. India already has a remarkably exportable culture in terms of its film industry, food and music, to name just three facets. Partnering with the UK, the world?s second largest exporter of film and television programmes (and the pioneers of chicken tikka masala) would generate significant benefits to both economies.
The roadblocks to future cooperation have little to do with the history of colonialism or worries about the relative status of the UK and the US. Rather, the worry is the lumbering bureaucracies in both nations. Most people find that both the UK and India are relatively difficult places to do business because of the significant amount of red tape that is entwined around all aspects of commercial activity in India, and the often slow pace of decision-making in the UK. The new special relationship could flounder unless this is confronted firmly by decision-makers in both countries.
?The author is a financial economist at Sa?d Business School, University of Oxford