Britain, Europe Look to India to Counter China

China has pulled off a rapid economic recovery from the COVID-19 pandemic, but the star performer of major economies in 2021 was India, which grew its economy faster. Analysts are predicting India will be the world’s fastest-growing major economy this year, too, the start of a long-term trend, they say.

The investment bank Nomura forecasts that China will grow by 4.3% in 2022 compared to India’s 8.5%. Britain and other European governments are taking note and redoubling lobbying efforts to penetrate the Indian economy and reach trade deals with New Delhi, which is protectionist and operates some of the highest trade tariffs on imports in the world.

India’s GDP is around $2.8 trillion, and forecasts suggest it could be the world’s third largest economy within 25 years.

In a bid to conclude a free trade deal with India, British Prime Minister Boris Johnson is ready to relax immigration rules to ease the path for thousands of Indians to live and work in Britain. Later this month, Britain’s international trade secretary, Anne-Marie Trevelyan, will lead a mission to New Delhi and raise the prospect of relaxing immigration rules for Indian citizens as well as reducing the fees for work and student visas, both longstanding demands from the Indian government.

Previous British efforts to secure an ambitious trade deal with India have foundered, stretching back a decade. In 2011, then-Prime Minister David Cameron and six of his Cabinet ministers went on what Downing Street described as the “biggest trade mission in history” to India, the world’s second-most populous nation, to pitch for business.

During the trip, Cameron said he wanted to take the relationship between his country and India to the “next level” and that the “possibility is there for dramatic expansion and I believe we should seize it.” But he came back largely empty-handed, and the following year Britain slipped from 13th to 16th in a league table of the emerging economic superpower’s trade partners.

More than a year later, there had been no return visit to London from any senior member of the Indian government. The leaders of the Belgium, France, Germany and the United States have all been on visits to New Delhi since then in a lengthening line of suitors all eager for trade deals and to drum up new business.

China

With India’s current fast economic growth, despite being hit hard by the pandemic, the suitors are knocking on the door again. For Western leaders, the drive to secure closer ties with India is also being driven by a determination to use India to counter the influence of China.

One option British ministers are looking into is a scheme similar to a deal Britain has with Australia, which would give young Indians the opportunity to work in Britain for up to three years. Another option would allow Indians who graduate from British universities to remain and work after they have concluded their studies.

One government official told The Times newspaper: “The tech and digital space in India is still hugely protectionist and if we could open up even a slither of access, it would put us ahead of the game.”

Last year, Britain and India agreed to deepen cooperation and signed an Enhanced Trade Partnership, which according to British officials will generate $1.4 billion of new trade between the two nations. Britain, however, is looking for a much bigger prize, to help compensate the country for its reduced commerce with the European Union since its exit from the bloc.

Neither the U.S. nor the European Union has secured a bilateral trade deal with India, but they, too, are looking to expand trade with the emerging economic titan. The EU is India’s third-largest trading partner, accounting for $72 billion worth of trade in goods in 2020 or 11.1 percent of total Indian trade. The EU is the second-largest destination for Indian exports — 14% of the total — after the U.S., according to the European Commission.

Last May, the EU showed renewed interest in negotiating a free trade deal with India after years of off-and-on negotiations and the leaders of the bloc’s 27 nations held a virtual summit with Indian Prime Minister Narendra Modi. EU officials said concerns about China are bringing Brussels and New Delhi closer. India is also alarmed at China’s expansionist ambitions, according to Cleo Paskal, an associate fellow at Britain’s Chatham House, a research group.

In a recent paper she said, “While the Himalayas have recently become increasingly strategically active, a secure Indian Ocean is also critical for India. Approximately 90% of both Indian trade by volume and India’s oil imports pass through the area.” 

She added, “India’s strategic community has been disconcerted by increased Chinese maritime activity in the region.”
…