Double digit growth in India should make us rethink where our trade priorities lie, regardless of Brexit
Back in the early years of the industrial revolution in the 1820s, the size of the Indian economy was between five and 10 times that of the UK. Then, as a result of 19th century expansion, the railways, steamships, cotton mills and so on, the UK pulled ahead. The Indian economy stagnated, and while Britain did invest in its infrastructure, the colonial ruler must take part of the blame for that. After independence in 1947 the economy grew, but slowly. However, the catastrophic economic policies of China meant that by the early 1980s the economies of the two most populous countries were roughly the same size.
Then the Chinese take-off began, following the reforms starte d under Deng Xiaoping, so that in 2018 its economy is five times that of India. But now India has started to close the gap, with healthy growth at 7.7 per cent a year, and is poised to overtake the UK economy for the first time since the early 1900s. Narendra Modi, Indiaâs prime minister, spoke this week of reaching double-digit growth in the future. That may be a stretch, but there is no doubt that India is well on its way to becoming the worldâs third largest economy, after China and the US, at some point in the next 25 years.
I find this thrilling for all sorts of reasons. For a start, Indian people deserve the better lives that growth will bring. For people who live in what will soon be the worldâs most populous country to achieve a middle-class lifestyle is surely wonderful for h umankind as a whole. Beyond that, India will have demonstrated that rapid growth is just as possible in a functioning democracy as it is under the more authoritarian governance of China. Celebrating democratic success is not to belittle Chinaâs achievement, which is also extraordinary. There are obvious environmental and other challenges â" how could there not be? â" but economic progress will generate the funds to help tackle these.
There are, however, implications that go far beyond India itself. It has just been UK-India week, a series of events that happen each year, when business leaders visit Britain and meet with government and other officials. I was at a dinner organised by the Confederation of Indian Industry, where the Indian delegation made a number of points, including expressing their displeasure at the UKâs visa arrangements. But something else stood out: the comment that within a generation the Commonwealth would be a larger economic entity than the European Union or the United States. I checked the figures, using the HSBC projections for the world economy in 2050, and in as far as these long-range projections are likely to pan out, it is probably right. The EU in particular will lose a lot of ground, and while the US will actually increase its footprint within the developed world (or rather the present developed world), the Commonwealth is likely to pull ahead.
The key driver of this is India itself, and the UK will remain around number six or seven, with Canada next. But the rest of the Indian subcontinent, and particularly the Commonwealth nations of Africa, w ill also bump up the score. So will the Commonwealth become a more cohesive entity, with India as its de facto leader?
There is a temptation in Britain now to see everything through the prism of Brexit. Might, for example, the Commonwealth become a substitute for the EU? But I donât think that is a very helpful way of looking at things, because trade will follow economic opportunity rather than political policy. Our exports to the EU are shrinking as a proportion of the total (now down from 55 per cent to a little over 40 per cent), not as the result of Brexit but simply because other markets are growing faster.
Th e better way to think of the Commonwealth is to recognise its growth potential and use it to smooth trade and financial flows. In other words, think of it as a useful way of reducing roadblocks that ought not to be there in any case.
There are several strands here. One is to make it easier for Commonwealth countries to gain market share in the UK for their exports. Another is to encourage inward (and outward) investment, and here Tataâs stewardship of Jaguar Land-Rover is a beacon of success. Another strand is to create a climate where skilled people can transfer more freely between Commonwealth countries. The lack of language barriers and similarity of legal systems makes all this much easier, a point made at that dinner by the Indian delegation.
The most impor tant thing for the Commonwealth, however, will be to accept Indian leadership, initially alongside that of the UK but gradually allowing the weight to shift towards the larger economy.
From a British perspective we should expect no favours. That is not what trade is about. India will in any case want to hedge its bets, building its relationship with China, with the US and with the EU. All this will take time. But this is an opportunity to rethink how the world will look a generation from now, and we should get on with that.Source: Google News India | Netizen 24 India