The City of London Corporation, the local authority responsible for the financial centre — and promoting its interests at home and abroad — has, over the past decade, made a concerted effort to strengthen ties with India. It has a representative office in Mumbai and last year, appointed Sherry Madera, a former investment banker, to the position of Special Adviser for Asia.
As part of the closer engagement, and following consultation with the city’s financial sector, the corporation has submitted its own proposals to the Ministry of Finance ahead of this year’s budget, with specific proposals on cutting corporation tax, and honing the tax system for the insurance and reinsurance industries (Britain is the world’s third largest insurance market while Lloyds of London opened its India branch in Mumbai last April). Madera spoke to BusinessLine about her proposals, as well as the future of India’s engagement with the City of London as Britain prepares to leave the European Union.
Some of your recommendations centre round the application of GST to the insurance sector. What is your assessment of GST overall?
Overall it’s welcomed — a consolidation of what was quite nitty gritty taxes is a great step forward but as with any anything complicated it’s an iterative process. There are challenges even as iterations happen. Even months in, there were significant changes brought in by the government. From the foreign point of view it’s the same questions as it is for Indian firms: how do we account for this, how do we change our systems to comply, with the worry that there is another change, and how do we make that expensive change again. I think the direction of travel is very much applauded and supported but implementation has perhaps been a bit rockier than anyone would have liked.
You’ve also recently launched your Asia Next Decade programme, giving a renewed focus to your push into Asia. Is this about preparing for Brexit?
London is talking about Brexit and Asia is more widely talking about business. And actually that has become more the case in the course of years. I’ve been to India five times (since my appointment) and of course they are interested in what is happening with regards to Brexit and that can take 10 per cent of the meeting but the rest is on how India can engage with the UK and how the UK can be part of the Indian growth.
India has made it clear that progress on issues such as movement of people and professionals is key for a deepening relationship with the UK. How crucial is this for you?
Wherever I travel from China to India and Singapore, the single most frequent discussion is about the access of talent into the UK. We very much believe it’s one of the tenets of a go-forward Brexit deal: retaining that global talent pool including from India. You have a discussion with India about a trade agreement of any sort and immigration and ability to bring people into the UK is the number one issue on the agenda. We feed that back here in the UK every time.
Do you see the potential for much movement on this issue?
In December the announcement of a deal with the EU (and the UK) was very positive and there was movement forward, but the specifics on talent from outside the EU is still very unclear. We like to think about this being a Brexit issue but the reality is that well before the referendum there were question marks about how international talent comes into the UK and immigration policy in general. There is of course a huge international footprint from outside the EU in Britain and the UK is a welcoming place, but the question is whether that welcoming nature is in tandem with where we expect to go in the next decade, and in terms of how we can link up with the biggest growth markets in the world, India being one.
Where are the growth opportunities for India and the City of London going forward?
We think there are three main areas for strong partnerships.
We are discussing a potential solution for the growing non-performing assets (NPA) issue in India — from our point of view we are looking in decades, it’s not something that can be resolved within months. It’s going to take a lot of experienced thought to help crack it. We don’t want to say this is how the UK does it, lets show that to India — that’s outdated. India is a thriving economy growing faster than us by a factor of at least four in any prediction, and India is also looking at over a billion people to bring up that prosperity. It’s a two-way learning from our perspective. There is one NPA issue we are really sinking our teeth into through the launch of the Insolvency and Bankruptcy Code. We’ve been working closely with the regulator and others to see how we can bring our experience to bear.
One of the key things for us when we visit India is to bring back the story that there is a new regulator in India (the IBBI), and it acts like a start-up in the urgency with which it’s building up work in terms of insolvency practitioners that are second to none. The word ‘bankruptcy’ is often tinged with negativity. However, the exciting part of the story I’m telling the market place is that investors should perhaps take another look at India because some of those previous barriers to bureaucracy being too difficult, the legal system taking too long, was putting people off.
The second issue is around the internationalisation of the rupee. Masala bonds have been a huge success but what comes next? Is it more Masala bonds or is it rupee denominated assets of a different kind? And how can Indian infrastructure projects be financed from the London deep market?
The third and most exciting area is fintech. We believe London’s mature fintech market could learn from what is going on in the big market but also has bits of technology that could be deployed there. At the moment the conversation is a bit difficult to engage in so we are trying figure out why that is. There is a lot of ambiguity about how you enter India most efficiently. How you can set up in a way that allows you to adhere to all the regulations but also isn’t embroiling you into bureaucracy.
How concerned are you about Indian companies looking beyond London to other European centres such as Luxembourg, Paris, Amsterdam, Dublin or Frankfurt?
The reason London is a global financial centre is that it’s a connector for all the world’s finance and as soon as you have five there is the potential for splintering — which is not good for financial markets. You need deep liquid markets which have the lowest cost of trading and this is appreciated by not just banks but others — corporate treasury and other financial investors. There is enough depth in the London market that you can be innovative. The Indonesian rupiah had never had a financial product listed outside Indonesia until last November, when the first Komodo bond was listed in London.
India has been speaking out against protectionism at a time it’s on the rise elsewhere. How encouraged are you by this?
It’s certainly encouraging. The use of the word ‘rhetoric’ is interesting because it’s really strong words coming out of the leadership. It’s a question of how many examples we have of that being modelled in real life. There has to be a two-way flow — right now India’s infrastructure needs are significant and they are struggling on multiple levels. The best way of solving that is with true openness and lack of protectionism and I think India does have to prove itself on that issue. For example, Masala bonds. They were gaining traction, having a positive impact, and then they hit a quota and it was stopped. Very very quickly it was rescinded and put right but that makes people worried. So it’s the continuous direction of travel that is going to make people say — ok, this is something now.