60% of British firms say they may increase their investment in India: Patricia Hewitt
New Delhi: British Prime Minister Theresa May’s visit to India last week helped to spotlight India’s importance in India-UK trade as Britain looks to rebalance its commercial links with countries post Brexit, according to Patricia Hewitt, chair of the UK India Business Council. To boost investment, the India-UK CEO forum has suggested that the two governments look at a bilateral tax treaty, Hewitt said. Edited excerpts from an interview:
What are the major takeaways from PM May’s visit?
It was very important indeed that PM May made India her first international bilateral destination. And I think that was very well recognised by our Indian friends. That said, two things—one was that following the referendum on Brexit, India, which was already very important to the UK, is even more important.
It has gone further up the Prime Minister’s list of priorities. But there was a deeper message. There was I think a real fear on the part of our Indian friends and others in other parts of the world that the referendum meant Britain was turning inwards and even at the risk of becoming protectionist. And I think what PM May said here publicly and privately has put that fear to rest. She has made it very plain that Britain remains open for business and that Britain is not turning its back on Europe but is trying to rebalance its relationships around the world to give more importance to its non-European trading partners.
I think there is a much better understanding between the two governments and critically between the two Prime Ministers on how to move forward.
There seem to be many stress points in the relationship—whether it is the Vodafone or Cairn India tax cases or Tata’s plans to sell Corus. What is your view?
I think the economic relationship is very strong. There are always issues in every bilateral relationship.
I would say on the tax issue, of course two years ago there was the hope that those issues would be dealt with and put to rest. The Indian government for various reasons decided that wasn’t possible. Those two cases are now in arbitration. They will run their course, there will be a decision. So if you like, it’s been factored in. At the CEOs forum meeting, there were some very constructive proposals for a possible bilateral tax treaty to create a modern framework, ensure that there is a right climate for investors and we get the maximum amount of capital coming in from the city of London directly into India.
It the past, much of this has gone through Mauritius; some of it is going via Singapore now. Actually, let’s have a bilateral tax treaty and deal with that issue. So actually, I would say there is less tension. The suggestion on the tax treaty came from the CEOs of both sides.
Can you please elaborate a little more on the tax treaty proposal? Is there a timeline for when it should be in place?
At this point, it’s a fairly new suggestion. It is to ensure for instance that investors don’t find themselves subject to double taxation. Vodafone Plc is covered by a double taxation treaty with the Netherlands but there isn’t one between India and the UK. And that is why so much British investment was routed via Mauritius and Singapore.
There was a positive interest in the idea from the Indian (government) side. But bilateral tax treaties don’t get negotiated overnight as you know. I think both governments were receptive to the idea.
What’s the sentiment among British businesses vis-a-vis India?
We recently did a survey of our members—British companies with an interest in India—and they were very positive about the reforms they had seen in the past two years, about the business environment in India and as a result, 60% of them were saying that they were more likely to increase their investment in India over the next couple of years.
And that is a direct result of the improved business environment. When you look at what the Modi government has achieved in less than three years, it is very, very substantial—one, the Ease of Doing Business and cooperative federalism.
The introduction of GST (goods and services tax) is a major step. The bankruptcy laws, inflation and interest rates coming down, lifting the caps on limits in FDI (foreign direct investments)—this is a very long list of achievements in a very short space of time.