But the list is long when it comes to some labour intensive sectors, be it from auto ancillary to leather to processed food. Which can be the biggest beneficiary according to you?
Swaminathan Aiyar: The government is anxious to emphasise that there will be job creation in artisanal, labour-intensive sectors like leather or textiles or auto ancillaries. I would just say that in the long run, we need to look away from the labour-intensive field. Our comparative advantage is in skills. We are very competitive in skills. We are not competitive on labour costs for there are a large number of issues on the labour side. It includes the very large number of holidays we have in India compared with anybody else, and relatively short hours of work. Because of all this, I do not think India has a great advantage in the labour-intensive sector which the government claims it wants to promote as our labour laws do not really promote that. So that is the real problem, our own labour laws, not the trade barriers in Europe, not the trade barriers in the UK. And we would have to do something about that.
In auto ancillaries, we can certainly have a move up. The British car industry has disappeared in terms of British names, but the multinationals of the world are there, certainly the Japanese and Korean companies and we can export there and hopefully at some point of time, we will even be able to export to Jaguar which is very high-end in terms of the auto parts, but Tata owns it. We are not competitive in large cars, but we are definitely competitive in small cars.
For countries in Europe, and in England, small cars are preferable, whereas in the USA, it is large cars. Small cars are preferable because of very high prices of petrol and because of a lack of parking spaces. Americans have huge parking spaces for their large cars. Britain and Europe are much more constrained by space. So, our small car exports should have a chance of rising significantly. It will also depend of course on what happens to the tariffs of various rivals. Malaysia, Thailand, China, all of these are competitors in small car areas. So, I am not sure what will happen out there, but if we have a good deal, if we have a very low tariff regime and they do not, that will clearly give us a benefit in the UK.
Does the FTA lay groundwork for wider cooperation in technology, green energy, and mobility? Will it also help boost investments in a meaningful way according to you?
Swaminathan Aiyar: There are a number of issues. As far as investment is concerned, will this help mutual investment? Will this help Indian investment in the UK? Will it help British investment in India? I am not sure to what extent it will boost British investment in India. The reason is that Britain hardly produces many goods anymore. It used to be a large exporter of goods, but it has substantially deindustrialised and become a services sector. So, it will want to do something more on the services sector which we should allow because we are competitive in services, we should allow them to come in.
But again, if somebody comes into the services with a GCC, it will not involve very much investment. It will certainly generate revenue. It will help generate skills. It will be skilling of the Indian workforce. There will be exports involved, but do not expect very heavy investment. It does not take a lot of heavy investment to start an R&D centre into artificial intelligence. So that is the kind of thing the British may be investing in India.
India is one of the biggest investors in the UK. The Tata Group is the largest single employer in the private sector in the entire United Kingdom. I mean, it has TCS, it has Jaguar, and it has its steel plant out there and those together are a massive amount of investment, a massive amount of jobs. Will that trend increase? Yes, it could increase. But as I said, that is now fundamentally a services economy. It is no longer a large-scale producer of merchandise.
So, can Indian companies like TCS which are already well established increase their footprint? Yes, I should think so, especially now that there is this freedom in terms of social security deductions. Earlier, if an IT worker went there, a significant part of his salary was cut saying this is a social security contribution although he would never get it back as a pension in his old age. Now that that is being waived for three years, we will be able to send lots more people for up to three years and this should induce much more Indian investment in the IT sector there.
I hope that happens. It looks promising. Of course, the other thing is that will there be more Indian writers for Financial Times and The Economist or more Indian footballers going into the Premier League, some of these areas and of course, there is the stock market. I mean, Britain is a highly financialised market with a huge stock market. It already has a significant number of Indian names that are already well known. I imagine that number could go up. How many of them would retain a close connection with India? I am not sure. But you could hope that a significant number of people go there and they improve their skills, send home remittances, and later on perhaps come back and open businesses here, so that is what we look forward to, something happening two-way and on this frankly I see more scope for Indian investment in the UK than the other way around.
