India is a developed country: Lord Swraj Paul
India and China should be considered developed countries and the UK could benefit from engaging these two emerging economic powers through trade, investment and the sharing of ideas, British Ambassador for Overseas Business Lord Swraj Paul has said.
"The products they are making are competing with those of the developed countries and the people engaged in the manufacturing processes are on par with the developed nations in terms of skills and numbers," the NRI industrialist said.
Lord Paul, who was addressing members of the Eton College Keynes Society on "Britain's Economic Relations with India and China," last evening said "for certain products, we in the developed countries are now dependent on India and China."
He noted that both countries were enjoying their roles as global players, and "that is why they are keen for the Doha Round to go through while the developed countries are reluctant to see that happen."
Observing that the investment climate in India is becoming more favourable, Lord Paul said India's English-speaking, educated workforce has been a huge positive for foreign investors looking for good destinations to invest.
"India is likely the only large country where the size of the working population is expected to grow over the next 20 years."
In addition to this demographic advantage, investment liberalization initiatives have recently made India a more attractive location for foreign direct investment.
"British intellectuals and policy makers have been showing for generations that open markets benefit both trading partners. The Prime Minister has also repeatedly declared his commitment to challenging EU agricultural policies," Lord Paul said
He said the UK stood to benefit from outsourcing work to India.
"One hears from time to time the cry about jobs going overseas because of outsourcing. However, the Confederation of British Industry has come to the conclusion that outsourcing has added something in the region of 16 billion pounds to the British economy."
He said "this is because the talent in Britain has been released from doing things that can be done cheaper elsewhere to concentrate on higher technology and more added value."
Lord Paul, Chairman of the 1.5 billion dollar Caparo Group, spoke analytically about the positive and negative aspects of India's growth. Noting that "India is on the path towards major power status," Lord Paul said the first major hindrance that strikes a new or a frequent visitor to India are the traffic jams, transport chaos and poor infrastructure not to mention erratic power supply.
"Infrastructure such as roads and power, are simply inadequate and many public services like drinking water and education have worsened. The growth in India's working population will not add to its prosperity unless more of its young people are educated. Fifty per cent of Indian women are illiterate compared with only fourteen per cent in China."
So far, reform in India has been concentrated on freeing the private sector and it has flourished. "But it is still hampered by a fearsome bureaucracy and the ever present corruption. Also the burdensome labour laws that need to be reformed."
Added to that, private investors were wary of investing in infrastructure because the regulators were not independent enough of the populist politicians to assure a decent return.
"If these things can be tackled then India will indeed be an economic tiger," he stressed.
Despite the overall promise of return on investment in India, Lord Paul noted that there were those in the UK who cautioned that India's development might not serve Britain's economic benefit.
"This is not the case. We in the UK stand to benefit substantially through actively engaging India with liberal trade and investment," he said.
Noting that India is one of the world's fastest growing nations, Lord Paul said "measured by market exchange rates, India's GDP is almost 900 billion dollars last year. Exports of goods and services total roughly 150 billion dollars per year. And the forecasts continue to show promising signs for the Indian economy."
In addition to the macroeconomic trends, a new aspect of India's globalization and growth can be found at the corporate level.
"Indian companies, with their outflows of foreign direct investment, are now becoming multinational corporations. Indian companies, eager to invest abroad, are acquiring manufacturing firms - for example the recent acquisition of Corus by Tata - in addition to premier software services brands, such as TCS, Infosys and Wipro."
For the first time, Indian companies are being viewed as major players in the world market, Lord Paul noted.
"India's history of democracy, which has continued uninterrupted since independence, also deserves praise. It is no small feat to maintain a secular, federal, multi-party political system in a vast land of bewildering variety and over one billion people.
"In sum, I truly believe India will be counted amongst the developed countries in the world - that the path of growth and reform that she is currently following will lead to global greatness."
Similarly, he said, China is also poised to become a major player in the world economy.