How chancellor woos India

Hague and Osborne

I am currently running on two hours sleep and a mild vegetable curry I had for breakfast in my hotel.

So I feel considerably less full of vroom than the tractors and cars made by the Mumbai plant of the Mahindra Group, where I have been traipsing behind the chancellor as he tours the factory floor, in the atmospheric conditions of a Turkish bath.

For George Osborne, it's hours of beaming over gear boxes and transmission systems, as if they were beautiful newborn babies.

Welcome to the grounding reality of winning foreign direct investment for the UK.

Not mega

Mahindra represents an interesting case study of how to persuade overseas companies to place their bets on Britain.

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Mr Cameron and his Chancellor will need to do a good deal more cooing over Mahindra's babies, to win its big money”

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Today it announced a £20m UK investment in electric-car research and development for Formula 1 vehicles.

OK, so not exactly megabucks. But Mahindra's automotive president, Dr Pawan Goenka, told me that the point was to develop technology that could be used for ultra-low-emission mass-market cars - and that would be a big deal.

Dr Goenka also gave me an insight into how hard it is to secure only £20m: it required the British Prime Minister David Cameron to have a private meeting with him.

Also it turned into a reality, thanks to subsequent spadework by Oliver Letwin, the cabinet office minister.


As I implied, £20m is hardly going to transform either the UK or Mahindra.

But Mr Letwin told me he sees it as the proverbial mackerel-catching sprat.

What did he mean?

Well Dr Goenka told me Mahindra would within six months decide on a much more substantial £100m research investment.

He said UK government subsidies would be helpful, if Mahindra goes ahead.

But the bigger prize would be mass-market production of electric cars.

I asked Dr Goenka how likely it was that Mahindra would become a big manufacturer in the UK, and not just an exploiter of valuable UK technology.

All he would say is that his company was minded to do something in Europe... one day.


Mr Cameron and his chancellor will need to do a good deal more cooing over Mahindra's babies, to win its big money.

Which may say something about where the real power lies, in a globalised economy that allows multinationals like Mahindra to invest their precious job-creating cash more or less wherever they choose.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 7.

    Dear Robert,

    Brilliantly observed piece. It clearly underlines the global nature of economics - and illustrates the near impossibility of getting inward investment into the UK - when the main cost of production: Labour, is so expensive in Britain. It makes no real economic sense any longer to manufacture in Europe, when the same product can be produced at a fraction of the cost in the far East.

  • rate this

    Comment number 6.

    Perhaps Osborne was discussing how British industry can be outsourced to India. Clearly he believes in globalisation, at the expense of British workers.

  • rate this

    Comment number 5.

    I wonder what "long term consequences " Hague is saying to Mr Bean in that photo?

  • rate this

    Comment number 4.

    Osborne: We have the technology, we also have a low paid workforce thanks to my austerity measures and here is a brown envelope containing a government subsidy. Come to the UK and put our economic slaves to work.

    Mahindra: Wow, an offer I cannot refuse. I get to make a profit on the backs of your people who are paying me to do it. Win win all the way.

  • rate this

    Comment number 3.

    I wonder how much this trip by ministers and their entourage and all the lead up spadework cost? £20m? :)

  • rate this

    Comment number 2.

    Time to start switching tax from road fuels to income tax, Mr Osborne, especially the higher rates of income tax. The 'golden egg' of £30bn+ tax is coming to an end, so prepare now.

    Sticking it all on sugar & fizzy drinks will have its own deleterious effects like the inflation & cost inflation in the UK economy caused by Fuel Duties & other indirects.

    It's time for widespread tax reform.

  • rate this

    Comment number 1.

    2 hours sleep and curry for breakfast? I bet it's like being back at Uni.


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