The new Labour government will do nothing to damage Indo-UK relations

Amberish K Diwanji in London

Every now and then the world changes, and nations redefine their relations with each other. It is for statesmen to seize the opportunities to forge new beginnings and strengthen old ones. India's economic liberalisation and market reforms, the growing use of English language worldwide, and the globalisation of trade have created a watershed moment with less than 1,000 days to go for the new millennium.

Clearly, the engine of new relations is the surging economic ties between India and the United Kingdom. The figures speak for themselves: in 1991, the year New Delhi began its policy of liberalisation, India's total trade with the UK amounted to £ 1.794 billion. By 1996, it had almost doubled to £ 3.318 billion. British investment in India is the second highest, after the United States.

Realising the trade potential, India and the UK initiated the Indo-British partnership in 1993, when Prime Minister John Major visited India, to promote trade and investment. Up to £ 8 billion has been invested by Britain in India and over 800 joint ventures signed so far.

India has moved slowly in liberalising its financial services, including the insurance sector, but once that is achieved, many British insurance firms, big names including Prudential, Sun Alliance, Eagle Star, are waiting to enter the market. A few have already formed alliances with Indian companies in anticipation of reform.

There is no doubt that British businessmen remain bullish on India. But for this to become a reality, much has to be done by New Delhi in further liberalising the economy. Complaints of hurdles to investment remain. "India is still very bureaucratic and we find much friction between the central and state governments," said former minister for trade and industry Ian Lang (of the Conservative party).

A Labour Party spokesman roundly blamed the Tories for the slowdown in Indo-UK trade. "Exports to India in 1996 grew less than to France and Germany, and it will be the priority of the Labour government to push up bilateral economic relations."

Comparing India with China, Granta editor Ian Jack said: "Despite the common history and language, Indian political instability and slow pace of reforms is making businessman look at China. China is autocratic and unpleasant, but it moves fast on business projects." Jack quoted the director of a major shipping company which lost interest in an Indian deal after it found out it could not sack surplus labour. "This may be socially right, but since Indian labour laws are much tougher than China's, it does hurt India's economic interests."

Swraj Paul, the well-known British industrialist of Indian origin, concurs. "My company no longer looks at India with seriousness because we have found that little has changed. Bureaucratic hurdles remain, projects take ages to get approved, whereas in other southeast Asian countries, it is done extremely fast."

Others, however, take a more positive view. Graham Watts of the Financial Times predicts that in the long run India would do better precisely because of its democratic and legal system.

The present situation is strategically different from the past, when the relationship was based more on the hangover of the Raj. Though the empire ended in 1947, many of the ruling elite and establishment in India were Anglophiles, often having been educated in the UK. Prominent historian Stanley Wolpert has even said that Jawaharlal Nehru, India's first prime minister, was the last Englishman to rule India! Justices in court would look to English precedents, and those who could afford it still came to study in Britain. Pax Britannica was alive, albeit indirectly.

The same was true the other way round. Many of the elite and senior officials in Britain had connections with India, either having worked there, or through relatives who lived or had been born in India. The relation was one of nostalgia, not of business.

Political differences arose, however. India refused to become part of the Western bloc, taking the lead in forming the Non-Aligned Bloc and spending much of its energy in leading the Third World countries in multilateral fora.

Through the late 1960s, India leaned increasingly towards the Soviet Union, and India and the UK found themselves often on opposite sides in the international debate. Through the 1970s, India grew closer and more dependent upon Moscow, not even opposing the Soviet invasion of Afghanistan in 1980.

According to a British specialist on India, the decline in Indo-UK relations reached its nadir in the mid-1980s when Sikh extremism was at its peak. Many of the militants had support from the Sikh community in the UK, and the Indian government always felt London was not doing enough to curb their activities. However, this situation began to improve from the late 1980s when the British government took firm action against many Sikhs accused of terrorist activities in India, following which Sikh terrorism slowly but surely died down.

Economically, Indo-UK trade remained low keyed from the 1960s to the end of the 1980s, as India followed a socialist economy with emphasis on the public sector and limiting the role of the foreign private sector. The end of foreign business participation also meant that the large community of British living in India was drastically reduced.

At the people-to-people level, however, relations remained excellent with continuing cultural and academic exchanges through the 1960s and 1970s. Migration from India to Britain had peaked in the late 1960s. The first-generation migrants kept their links and many of the second-generation sought spouses in India, thus further cementing ties with India and Indians. All of this ensured that even at its worst, India and the UK were on friendly terms.

Yet, changes in the relationship were under way. In the UK, those with direct links to India have decreased; those in the establishment have few, if any, links to India which remains only a tourist destination, partly for sentimental reasons. In terms of education, most young Indians began choosing universities in the US for courses in technology, medicine, management, computers, and even for the social sciences. As Ian Jack points out in the special India edition of his magazine: 'A Harvard MBA is worth three Oxford BAs in the Indian job market.'

In terms of popular culture today, the US dominates in India, and the growth of satellite television is only making it easier to bring more of America into Indian homes. Music, movies, fashion, technology, it is the US all the way, at least as far as the middle class and better-off sections of the populace are concerned. Migration to the UK has come down, while it remains high to the US. This pattern will remain unless the US changes its immigration laws.

The emergence of trade blocs in Europe and Asia is a further sign of change, but this need not weaken links. "Britain is committed to ensuring that the European Union does not become an inward looking and protectionist club," said a Conservative Party spokesman. Undoubtedly, the new Labour government is likely to follow the same policy.

This remains important for many Indian businessmen who see Britain as the gateway into Europe for suppliers and the transfer of technology. For Indians seeking to do business in Europe, the best starting point remains London, with its large financial services sector, as well as the common language and similar legal system.

Political differences between India and the UK have now diminished, despite fears that the new Labour government might hurt India's interest on Kashmir. Diplomatic sources, while unwilling to be specific, insist the new government will do nothing to damage Indo-UK relations.

Gautam Sen of the London School of Economics said, "The British are too interested in the Indian market to let anything like Kashmir upset the apple cart. Britain has been far more accommodating of the Indian views on Kashmir today, compared to the hardline stand taken by Harold Wilson in 1965. Sheer economics will dictate a soft political line."

While economic growth is likely to fuel Indo-UK ties, political relations too need an upswing. India and UK have tended to agree to disagree on issues such as a nuclear arms ban or on the restructuring of the United Nations. The previous Congress government also paid little attention to the Commonwealth, and P V Narasimha Rao did not attend a single Commonwealth Heads of Government Meet in his five years as prime minister.

Traditionally, India has been closer to Labour than the Tories, though this may be changing. Labour remains aware of this sentiment, and is trying hard not to upset the apple cart. Labour leaders have realised the party's pro-active pronouncements on Kashmir in 1995 made many in New Delhi uneasy. The party has gone out of its way to emphasise it will seek to help only if invited by both India and Pakistan, and it respects the sovereignty of India.

With Prime Minister Tony Blair -- a young man with many firm ideas on trade -- and India's Inder Kumar Gujral in the driving seat, Indo-UK ties should continue to widen and deepen as the two countries go into the next century.