Power shifting as India rises above its former rulers

Power shifting as India rises above its former rulers

In the days of the British Raj, India was a subject of British rule in terms of politics and economy. Fast forward 70 years and the situation has somewhat reversed with Indian companies, most notably Tata, influencing the British economy.

The presence of India became clearer in the recent crisis facing the British steel industry. In fact, steel along with tea and the growing share of Indian companies in the UK economy show how the former imperial servant has become a competitor and in some cases has overtaken the UK.  Several economic indicators exhibit this changing power structure; for example, the gap in trade levels between the two countries has been significantly reduced in recent years.


Furthermore, in terms of foreign direct investment, India is catching up to the UK. FDI lets India exceed its imports over its exports with the help of borrowed capital, without falling short of foreign exchange. In turn, foreign capital lets India accelerate its economic development without reining in consumption.

In the steel industry, the servant is becoming a master

The British steel industry, while steadily shrinking, is still a significant part of the British economy, especially in the locations where steel production remains. To name a few, Port Talbot in South Wales and Scunthorpe in North England have the steel industry as a core part of their local economy. Therefore, when Tata announced it was selling its UK steel business, the impact on the local and national economy was huge, and is still being felt. 720 jobs were cut in July 2015, 1200 in October and 1050 this year.

The ensuing effect on the British economy is yet unclear, but it will likely result in a reduction in manufacturing, which currently accounts for 10% of UK economic output. The fact that the decision of an Indian company gives rise to such an impact in Britain shows how times have changed. Business Secretary Sajid Javid travelled to India  to meet with Tata in an effort to save parts of the steel industry, in an exhibit of how Britain relies on India for part of its economy.

Tea, a British staple, is increasingly on Indian hands

Changing power dynamics is also seen in the tea industry. Two large and renowned British tea companies are currently owned by Indian companies . Tata owns the Tetley Tea brand under its Tata Global Beverages brand since acquiring it in 2000. The Apeejay Surrendra Group has owned the Typhoo brand since 2005. The potential influence this can have in the UK is clear, given that tea is still the most popular hot drink in the UK, with over 165m cups being drunk every day. The entire UK tea industry has an annual turnover of £748 million.

Tata also owns the great British car manufacturers of Jaguar and Land Rover, which produced half a million cars in 2015 and is now the biggest carmaker in Britain. Tata is a powerhouse in India itself, with the name branded all over from cars to food. Therefore, Tata’s takeover of treasured British household names indicates that India’s economy is intrinsically linked to Britain.

India’s presence in the UK is growing evident

From a more general perspective, India’s influence on the UK economy can be seen. For example, a 2014 report by Grant Thornton showed that there are over 700 Indian owned businesses in the UK, employing more than 100000 people. Furthermore, the top 41 fastest growing Indian companies in the UK generate some £19 billion of turnover. These businesses are in highly technical and successful industries with 22% in pharmaceuticals and chemicals and 32% in technology and telecoms. Finally, these companies employ people all over the UK with 29% in the North, 10% in the Midlands, 29% in London and 32% in the South. Overall, it is clear that India plays a substantial role in the UK economy via several Indian companies investing in the UK.

The Modi government should strive to open India further to global trade

If India continues along the path of high growth and increasing living standards, the current government under Narendra Modi can justify its policies and overall governance. Modi has had a mixed reception in the early years of his premiership. His attempts to nurture closer foreign relations was tempered by domestic problems at home, particularly tensions between different religious groups. If Modi can continue to broaden Indian influence in the UK economy, then the UK and others will be less likely to pressure India to clean up its act back at home, for fear of souring trade links. The Modi government needs to maintain its good relationship with the UK and other countries, particularly as it won the election on a basis of being able to open India up to the global economy.

Through large industries and certain companies, India has become quite an integral part of the British economy and a major player in how the country progresses. This is a far cry from the early 20th century and the days of the Raj, the Viceroy and the British imperial system. Put it this way, back then it was the Indians coming to Britain to be part of the decision making processes for governing back home. In present day it is the British going to India to ask them about decisions back home. Times have changed.



About Author

Rayhan Chouglay

Rayhan Chouglay is a GRI Analyst. He holds a BA in History from the London School of Economics with a particular focus on Hindu-Muslim relations in South Asia. His main political risk interests concern relations between India and Pakistan.