Insuring A New Initiative

BRITISH Prime Minister John Major is preparing his second, and probably last, push to British investment in India when he arrives in Calcutta on January 9 with 50 businessmen. Three Januarys after he launched the Indo-British Partnership Initiative (IBPI) in New Delhi, interest in India has waned—and with it the little investment that came.

Statistics shred the hype. In 1992 before it all began, the British invested £15 million in India. After the launch of IBPI, investment in 1993 rose to £41 million. It peaked in 1994 at £85 million. And in 1995 this level of investment dropped to a third—no more than £28 million. The 1996 total has not been added, but by all accounts there won't be much to add. But trade has grown 80 per cent between 1992 and 1995. The British sold £1.68 billion worth of goods to India in 1995. Indian exports to Britain rose to £1.43 billion last year. But after a brief period to India's advantage, the trade gap has been growing steadily to British gain. There is much here for the 1993 cynics to point to. The British are looking for a market not partnership, for business not investment.

A report produced by a trade and industry committee for the House of Commons asks for renegotiation of the double taxation avoidance treaty between the two countries, "with a view to achieving terms which would encourage foreign companies investing in India to do so through the UK". Major is bringing some financial heavyweights with him to sell the advantages of such 'reforms'. Decision-makers from the HongKong and Shanghai Bank, Natwest, Barclays, Standard Chartered Bank and others are looking for a rerouting of the Mauritian way via London.

More immediately, British insurers want doors opened to them. Chairmen and chief executive officers from Commercial Union, Eagle Star Holding (the insurance wing of the now famous British American Tobacco company), Prudential and Sun Alliance will be there to push Major to speak to the Indian Government for them.

Visiting British leaders customarily speak of the need to delink business from Government in India. That is not the language ministers speak in Britain. The British government's response to the recommendation of the House of Commons committee to support liberalisation of India's insurance industry was: "The Government fully accepts the continuing need to press for the early liberalisation of the Indian insurance market and to support the British companies seeking to enter that market."

Ian Lang, now president of the Board of Trade, who is accompanying Major, did that last when P. Chidambaram visited London in September, the British government response declares. But India is not a very insuring country. On an average, as much as 7 per cent of the GDP of western countries comes through insurance. In India it is 0.7 per cent. That shortfall spells opportunities for British insurers.

Britain's golden 50 are coming not for some Indian attraction but for subcontinental exploration. Major will also visit Bangladesh and Pakistan, and many of the businessmen will go with him, though some will go different ways with Lang, and others will follow paths of their own. India will be at the heart of the visit. Pakistan and Bangladesh do not offer anything like the Indian market. The current British estimate of India's middle class is 200 million.

The House of Commons committee has asked the Department of Trade and Industry to "review its funding of the IBPI and for promoting trade with India in relation to its other trade promotion activities to ascertain whether the benefits from greater promotion of trade with India would exceed those from using the same resources to promote trade with other countries". The message is clear: buck up or we'll go elsewhere. Three years is too long for that 1993 excitement to have lasted. It is also long enough to have turned that excitement into investment. This time the focus will not be on effects but on find-ing ways to be effective.