Exports down as Britain spurns the wide-open market of India

Drop of 2.2 per cent recorded despite investment plea and total imports into the country rising 34 per cent

Britain's exports to India fell last year, despite the country enjoying dramatic growth and Indians having a great desire to trade with the UK.

Britain's exports to India fell last year, despite the country enjoying dramatic growth and Indians having a great desire to trade with the UK.

The downturn in exports was 2.2 per cent in 2004, to £2.29bn. That allowed imports from India, which rose by 9 per cent to £2.34bn, to overtake them for the first time since the country became independent in 1947. The fall in UK sales came despite overall imports into India growing by an astonishing 34 per cent.

The fall has pushed Britain to third place in the list of India's trading partners, after the US and China, raising the question of whether the UK is missing out on one of the most exciting business stories in the world.

To try to boost the UK's interest in the country, the Confederation of Indian Industry (CII) sent a delegation of top businessmen to London last week. The team included Narayana Murthy, founder of Infosys Technologies, YC Deveshwar, chairman of ITC, and Harpal Singh, chairman of Fortis Healthcare.

They pointed out that massive investment was needed in the country's infrastructure and power industry - $150bn (£80bn) for the former and $200m into the latter, according to official estimates.

This creates a superb opportunity for British firms. However, when asked if it was going to invest in India, International Power said it was merely monitoring the situation.

"The government is allowing 100 per cent foreign direct investment in power and infra-structure," said Mr Deveshwar. "It has said investors can get up to a 16 per cent return on investment depending on the price of power."

The UK has been showing a great deal of interest in the financial services sector. Standard Chartered is the largest foreign bank in India, HSBC has a large operation and Prudential has an insurance joint venture with ICICI Bank, where it would like to buy control.

But in private equity investment, the UK is lagging the Americans. US group Blackstone recently said it was launching a $1bn fund to invest in Indian companies, while Carlyle Group, the Washington fund manager, is expanding its operations in India.

The country also faces problems because of the increasing demand for oil and gas as a result of its economic growth. It is looking at building a number of pipelines, including one from Iran that would cross India's old enemy, Pakistan.

"I can see these becoming viable," said Vikram Mehta, chairman of Shell in India. "In the past they were not because of politics."

Last week a UK newspaper caused a storm by alleging it had bought bank details of thousands of UK customers from an Indian IT specialist. However, some banks allegedly involved do not have Indian operations; others said they were sure the details did not come from their call centres.