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ON COURTING HEDGEHOGS

- What can Britain and India do for each other?

In my last column I wrote about how David Cameron had courted India, and how little headway he had made with our sullen and somnolent leaders. He has learnt his lesson. Nowadays, when he comes, he only makes a fleeting courtesy visit to 9 Race Course Road, and leaves immediately for Bangalore or Poona where he meets businessmen. Last time he even met Mamata Banerjee.

He is right; meeting ministers in Delhi is waste of time. What he has in mind is an alliance that would last for decades; they cannot even think six months ahead. The present prime minister is famous across the world for his rescue of the Indian economy two decades ago. But he was dealing with a crisis then; he was thinking a few weeks, or perhaps months, ahead. He has been in power for eight years; his finance minister has been one, off and on, for even longer. But if one were to ask how they have bettered the future of India, or what is their long-term strategy for India, one would come away clueless. Still, it is a question we should be asking.

Cameron is proposing one such future. It is not the only one; and it does not exclude other futures. But it is worth spelling out in greater detail. That should ideally be done by the two governments or their nominees, for it will require action by them. But if they cannot agree to define their vision, it is still worth speculating about.

Cameron did some preliminary dreaming. He wants the two countries to improve their infrastructure, invest more in each other, integrate their universities and trade more. They should work together in fence and counterterrorism, and on technologies, such as electric cars, to reduce future climatic adversities.

These are good ideas; but Cameron needs to find a way to persuade the sullen and somnolent Indian government. The prime minister and his Sherpa go to meetings of the Group of 20 where they share the limelight with the world’s powers; they feel they have arrived. They are being courted by the greatest; like typical Indian belles, they draw their veil and put off all suitors. While they are away, they are thinking about the latest demonstration at Jantar Mantar and the next election; they are just not used to looking further into the future. They would point to their latest five-year plan to demonstrate their farsightedness; but a more mechanical and less imaginative document can hardly be imagined. What the country needs is a different, a better, future; the planners simply cannot envisage one. So let us forget them and ask: what might India do together with Britain that would make India a better country? What is it that Britain does better than India? What can they do together that they cannot do alone? Britain is one of the world’s top two financial powers. London is second only to New York; its financial sector employs a quarter of a million people. Its status is contestable. The Europeans resent the fact that two-fifths of European capital is raised in London, and would like to take the business to the continent. Newer markets such as Singapore and Hong Kong are trying to increase their market share. London could gain traction against competition if it got access to the Indian market. Our bureaucrats would be hostile to the idea. But the Indian capital market has failed to finance Indian industry and business. This is due to the extremely verbose, bureaucratic methods of the Securities and Exchange Board of India. Most of India’s business is in the hands of unquoted, non-public enterprises; they raise nothing in the capital market. Thousands of non-bank financial companies have come up to help them. But the Reserve Bank hates them, and has tried its best to kill them. So the backwardness of the Indian capital market is due to the primitive regulators the government has created for them. Britain too has regulators, but they are well known for their light touch. What India could import is the technology and ideology of regulation. And if it did so, it would become much easier for our small and medium enterprises to raise risk capital. This is where Britain could help; Cameron should appoint a commission to work out how.

Another field is one that Cameron mentioned: that Britain could help India increase its exports to the Atlantic region. India’s export performance is lousy; it explains a good deal of India’s loss of ground relatively to China. The reason is well understood: China built much bigger factories and ran them better, so its manufacturing costs were lower, and it conquered the world markets. But there is also another, less known part of the story: that Indian quality is not consistent. India’s biggest export industry, like China’s, is engineering, where consistent quality is crucial to competitiveness.

Britain is no longer a leading manufacturing nation; but if it wants to try selling Indian goods in Europe and America, and helps us improve our industry in the process, it is very much worth trying. A third area in which Britain could help India is health care. India has a standard model for public services: create a host of them, extend them all the way to panchayats, and leave them to village officials to make money out of. As a result, the effectiveness of Indian public health care is minimal. The British national health service is still as good as anywhere in the world. The Conservatives feel it is costing too much, and are trying hard to reduce its expense. But the NHS is a working model. It has two parts. One is doctors spread all over the country, each of whom serves a certain proportion of the population. The other is hospitals, to which doctors refer their clients who need treatment. The army of doctors works very well; hospital treatment is under stress because the government finds it too costly. It does not expand hospitals enough, so there are long queues for admissions. The British medical establishment is worth learning from; its hospital network is not. It would help us if we took British help to redesign health care; and we should supply low-cost hospital services to Britons.

Finally, Cameron mentioned cooperation amongst universities. Oxford and Cambridge were once the Mecca for Indian students. But in the last fifty years, they were overtaken by American universities, where bright Indian students found it easier to get scholarships. Once the US began to recruit programmers, from the 1980s onwards, India’s ties with American universities grew even closer. This is unlikely to change soon: costs of a British education are high, and all British universities are not that good. But India has dozens of third-rate universities; even collaboration with second-rate British universities would improve them.

These are only some of the possibilities. Above all, partnership with Britain would help open Indian systems and bring new ideas into a structure that has stagnated. Some of them will be good; some may not be. It is for us to decide. But the opportunity for learning and improvement beckons. Let our blimps not throw it away.