Prime Minister Modi’s UK visit a commercial success
Prime Minister Narendra Modi visited the United Kingdom last week as part of his continued efforts to encourage international investment in India. The visit was touted as a historic opportunity to increase investment, trade and cooperation between the two nations, who already share a strong commercial and cultural bond. India is currently the third-largest source of foreign direct investment (FDI) for the UK and British-Indians form the UK’s most prosperous ethnic minority, representing two percent of the population but contributing six percent of the GDP.
The visit included an address to the British parliament, lunch with the queen, and a 60 thousand-strong rally at Wembley. During the trip Prime Minister Modi also signed deals worth nearly $14 billion in the defense, energy and the finance sectors.
Prime Minister David Cameron made clear that the UK is willing to be India’s foremost partner in raising investment for Prime Minister Modi’s economic vision, indicative of his enthusiasm for forging closer commercial ties with India. Prime Minister Modi highlighted changes in the government’s attitude towards business by promising a new ‘fast-track mechanism’ for British investments in India. The positive commercial outcomes of the visit at the international level come at a time of some uncertainty on the domestic front for the Prime Minister given the defeat of his political party in the recent Bihar elections.
Highlights of the visit
Signed deals and announcements. As expected, a few significant commitments were made during the visit:
- India and the UK entered into a civilian nuclear agreement.
- Intelligent Energy and GTL signed a $1.8 billion contract to provide clean energy for 27,400 telecom towers.
- Lightsource (the largest solar power generator in Europe) and SREI infrastructure signed a memorandum of understanding to play an active role in raising India’s solar power capacity from 4GW to 100GW by 2022.
- Britain’s OPG Power Ventures announced a $4.4 billion investment to add 4,200 MW of capacity in Tamil Nadu over the next few years.
Ahead of the visit, there was an expectation that Prime Minister Modi would close a deal for the purchase of 20 Hawk Mk132 training aircraft from BAE Systems. However, this deal was not announced publicly. Reuters had estimated that the deal would be valued at up to $450 million.
Strategically important developments. Prime Minister Cameron suggested that the UK should be India’s ‘number one partner’ in raising capital for Prime Minsiter Modi’s Smart Cities initiative. The City of London expressed its keenness to establish itself as the world’s center for trading the rupee. This process will begin with issuing $1 billion worth of bonds on the London Stock Exchange.
In a global context, Prime Minister Cameron’s strong support for India’s bid to become a permanent member of the United Nations Security Council was a highlight. He also advocated India’s membership in various export control regimes. The two leaders issued a strong message on terrorism and climate change, promising to move forward on both issues in multilateral settings.
The visit demonstrated Prime Minister Modi’s growing international stature, his strong economic diplomacy and a single-minded focus on increasing FDI flows into India. India’s relative resilience in the face of tepid global demand, coupled with the government’s pro-investment overtures, are beginning to gain traction among foreign investors. The United Kingdom looks set to become a more important investor in the Indian growth story.
While the sentiment is largely positive, it is critical for Prime Minister Modi to demonstrate concrete outcomes from his foreign visits by translating commitments into real projects on the ground. The domestic criticism of his international focus, coupled with the debacle of the Bihar elections, emphasize the importance of moving from creating excitement to changing realities.