It is a truism that India has a major role to play on the world’s stage in the 21st century. Indeed, a tipping point has been reached in global manufacturing history as Tata takes over Jaguar and Land Rover. My recent talks with business people in Chennai, Mumbai, Pune and Delhi showed me first-hand the Indian entrepreneurial spirit.
Image: Jayachandran / Mint
Although the long-term prize for India is probably no less than a leading role in world and commercial affairs, this prize has not yet been won. And what happens to India over the next decade is a matter of prime importance, not just to India, of course, but also to the UK. India and the UK are in a strategic and equal partnership based on many long-established ties grounded in shared values and, literally, millions of individual personal relations. Our mutual prosperity depends on each of us doing well in a competitive world.
In the UK, we have made many mistakes: for example, the 2,000-year history of that part for which I am responsible, the “City of London” financial district, is littered with failures and wrong turnings. Indeed, our deeply pragmatic approach has managed to turn these failings into the basis for future success — and others have learnt, too.
Although the latest Global Financial Centres Index ranked the financial City of London ahead of New York as an international centre, we know this is no grounds for complacency. Especially when markets worldwide are under unprecedented scrutiny. The same report — and independent research on the long-term success of financial centres — highlights the importance of openness as a basic principle.
It is here that we find a mismatch that works to India’s disadvantage, leading, for example, to a surprising perceived decline in Mumbai’s position as a financial centre (falling to 48 on the Global Financial Centres Index). Mumbai deserves to be in the Top 10. This issue is vital as India’s much-needed growth in efficiency and productivity requires investment and input from world-class companies — this won’t come in the required volumes and timescale while India ranks 120th out of 178 countries in the World Bank’s “Ease of Doing Business” index.
An example from my former career of corporate legal advice is illustrative although the openness to which it refers applies to banking, accountancy and other financial and professional services as well.
Because London sets great store on being open to all, Indian lawyers working in England can practise Indian law or, indeed, any law. They can open offices, employ English lawyers, solicit clients and advertise without restriction. They can advise on English law, and only have to take a simple test if they wish to get involved in the so-called reserved areas of probate, conveyancing and litigation. Taking this Qualified Lawyers Transfer Test (QLTT) in no way presents a barrier. It exists to make sure that vulnerable members of the public are advised only by those who understand the rules of conduct in the UK. I know many Indians talk about reciprocity: in one sense this is precisely the issue, except that UK lawyers would welcome the same liberty in India.
I am sure foreign lawyers would welcome an Indian version of the straightforward test that the UK stages. The UK can allow this openness because the country as a whole determines that the advantage to all, including to our home-grown lawyers, lies in being open. Any attempts in the past by some English lawyers to set up monopoly barriers have been long swept aside. This is of immense value to the domestic and international business and the wider community as it ensures that the most precious commodity — good advice — can be freely traded at a competitive market price.
Many in the Indian business community want and need access to the advice of international law firms, and many global businesses keen on India want to bring in their own trusted (legal) advisers.
India’s own high-powered expert committee report on developing Mumbai as a financial centre says that opening up India to foreign lawyers (who don’t want to work in the courts and could be prohibited from doing so) will help in three ways: “It will improve the legal knowledge available in the country, particularly on the interfaces between finance and law. It will help global finance firms feel comfortable operating in Mumbai, as they would find familiar global legal firms. It would have the same impact on improving the skills, technology and competitiveness of the Indian legal services industry that permitting FDI had on Indian industrial firms.”
Many others understand that foreign lawyers will not appear in courts, and will, in fact, advise on mergers and acquisitions, capital markets, financing deals, infrastructure projects and transnational transactions — things that India needs. Indian advocates — 90% do litigation work — understand they are not threatened in this; the sticking point seems to lie with a small number who do transactional advice and fear they would not be able to compete with big international firms. It is not a question of employment: Any international firm operating in India will be mainly staffed by Indians. Instead, it is a natural fear of stiffer competition. Yet, the experience of London is that competition is in the overall best interests of everyone as it drives up standards and ensures the best advice. This is why we have more than 200 foreign law firms — including nine Indian firms — in London, and welcome more.
It is a quest of balance of advantage: I see the most important advantage in the Indian business getting the world-class legal advice it needs in an open market. Only with the best can the best be achieved and India, frankly, need fear no one when it comes to open competition.
David Lewis is Lord Mayor of the City of London. Comments are welcome at email@example.com
(We will publish a counter-argument on Thursday.)