Jewels In Their Crown

Gordon Brown may be trying to encourage better bilateral trade relations with political carrots, such as emphatic support for a permanent seat for India on the U.N. Security Council. But with elections due within the next 15 months, Prime Minister Manmohan Singh is unlikely to push through contentious reforms. "Change will happen very slowly," says Julius Sen, an expert on international trade at the London School of Economics. "There is a perception in India that international investors will just go for the low-hanging fruit." The cliché isn't entirely without merit; while Indian banks maintain a network of low-profit rural branches, it's unlikely a British incomer would. India's micro-stores would likely be driven out of business by Western behemoths.

Indians argue that there has been significant dismantling of trade barriers already. "It's now more a matter of which sectors you can't invest in, rather than which you can," says Mukesh Rajani, who runs the Indian desk of PriceWaterhouseCoopers in London. Andy Scott of the Confederation of British Industry notes that unlike in totalitarian China, "in India you pay the price of democracy," a price that involves concessions to public anxiety over the impact of foreign investment. A robust political system in which leaders have to trouble themselves with election outcomes may be the Raj's last great bequest to India; British business will have to live with the consequences.

© 2008