British prime minister heads to India for trade talks

India-UK trade ties have proven difficult to improve and talks between Theresa May and her Indian counterpart Narendra Modi are expected to be plagued with difficulties.

British premier Theresa May and secretary of state for international trade Liam Fox departing from Heathrow Airport on November 6, 2016 with a delegation headed to India where they were due to hold trShow more

British prime minister Theresa May’s trade mission to India – her first bilateral visit outside the European Union – is likely to be plagued with difficulties as the UK and India tussle over thorny trade and immigration issues.

Mrs May was to arrive in New Delhi late on Sunday for the three-day visit, leading a 40-member delegation of bureaucrats and business leaders. She will meet her Indian counterpart Narendra Modi on Monday, as well as businessmen and investors in the capital.

“We have the chance to forge a new global role for the UK – to look beyond our continent and towards the economic and diplomatic opportunities in the wider world,” she said in mid-October, when she announced the visit.

“I am determined to capitalise on those opportunities, and as we embark on the trade mission to India, we will send the message that the UK will be the most passionate, most consistent and most convincing advocate for free trade.”

But India-UK trade has proven difficult to improve. Mrs May’s predecessor, David Cameron, took office in 2010 pledging to double trade between the nations in five years. Despite Mr Cameron’s three visits to India, however, trade fell from US$15.7 billion (Dh57.66bn) in 2011-2012 to $14bn in 2015-2016.

Mihir Sharma, an economist who is a senior fellow at the Observer Research Foundation, a New Delhi-based think tank, said India and the UK had proven more adept at increasing investment compared to trade in manufactured goods.

“Partly that’s because British manufacturing companies have simply not been as ambitious or as effective in marketing their products here as, say, Korean or German ones,” Mr Sharma said.

“Partly it’s because Britain’s engagement with India has tended to prioritise investment – into British companies and real estate – and cultural links, rather than the nitty-gritty of making it easier for British exporters and importers to deal with India.”

Until now, Britain also had to negotiate its trade deals through the EU, and that came with its own bottlenecks.

Mr Sharma cited France’s wariness of agricultural imports damaging its farming sector to illustrate why an India-EU free-trade agreement has still not been signed, after nearly a decade of talks.

Part of Mrs May’s reasons for Brexit involved freeing the UK up to negotiate trade agreements on its own, unhindered by the demands of other EU members.

But another plank of her Brexit campaign – to cut immigration to the UK – will prove a point of contention during her time in India.

Mrs May’s government has promised to cut net migration into the UK to below 100,000 per year. Last year, 327,000 migrants entered the UK, of whom 119,000 came from Asia and the Middle East. The UK has increasingly made it more difficult for Indian students to attend British universities, and to stay on to work following graduation.

As home secretary in 2010, it was Mrs May who implemented the plan to scrap the post-study visa plan, which gave students up to two years after graduation to stay on in the UK and seek employment.

"In the last five years or so, the number of Indian students enrolling in UK universities has gone down by almost 50 per cent, from around 40,000 to about 20,000 now," Vikas Swarup, the spokesman for India's ministry of external affairs, told The Observer newspaper in London. "This has happened because of restrictions on post-study stay in the UK."

Earlier this week, the British government also announced measures to tighten immigration. Employees seeking intra-company transfer visas, to enable a move from India to the UK within the same company, will be required to show an annual salary of £30,000 (Dh137,935), up from £20,800.

The rule will affect IT and software firms in particular. Roughly 90 per cent of Indian IT workers in the UK are on an intra-company transfer visa, according to the UK’s migration advisory committee.

Signalling his government’s intent to link these curbs on immigration to Mrs May’s desired trade deals, Mr Swarup said: “We will continue to raise our concerns regarding mobility with the UK. Mobility of people is closely linked to free flow of finance, goods and services.”

“For India, visas are at the top of the list of issues,” he said. “The British government has pledged to control immigration. If there’s any common ground between these two demands, it will probably look something like the attitude of Australia or Canada, which provides a simple but restrictive system for high-skilled, temporary migrants.”