Profile: Don't mention the Raj: India's PM has a canny habit of coming out on top, despite his critics, writes Michael Fathers: Narasimha Rao

THE INDIAN Prime Minister, Narasimha Rao, arrives in London today to a reception that shows how his country is upping its status in the world. Mr Rao will be pampered and entertained by every institution that matters - Bucking ham Palace, Downing Street, the House of Commons, the City of London, the Board of Trade. Senior ministers - Douglas Hurd, Malcolm Rifkind, Michael Heseltine - will pay him court at his hotel. Official London will fall over itself to make him welcome.

Britain is waking up, as other countries - Japan, the United States, France and Germany - have already, to economic opportunity. There is a customer at the gates: a country of 850 million people, the second most populous in the world, which is dismantling its trade barriers and joining the great global consumerism. 'India,' said a senior man at the Foreign Office last week, 'is a country of huge economic potential whose diversity is bound by its exuberant freedom.'

This is a new way of talking. India has been important to the British economy since the nabobs of the East India Company set up shop in Bengal in the 18th century. Independence in 1947 did not greatly change that. Tea, jute and textiles continued to sail west, passing an eastward traffic of car presses, second-hand destroyers, aircraft and power station turbines. The two countries shared a language, a culture and history. But industrialised countries, with superior technology and salesmanship, replaced Britain as India's largest trading partner. By the end of the Sixties every box-wallah had come home from Calcutta; dealings between governments grew testy over South Africa and the militant Punjabi secessionists who had found a home and a voice in Britain.

India, in the official and business mind of Britain, was identified as non-aligned but tilting towards the Soviet Union, with an economy which was centrally planned, inefficient and still in thrall to the socialist aspirations of its first and greatest prime minister, Jawaharlal Nehru. And in the popular mind it became nostalgia, the Raj, servants, steam engines.

And now, the great awakening to a sea change in Indian aspir ation. It has, to be fair, been going on for some time. Last year India's exports to Britain jumped 26 per cent. The royal yacht Britannia was sent to Bombay on a trade promotional visit. In one day, British bus inessmen signed deals worth more than pounds 2bn. These are symptoms of the new Westernisation of India - the West of Nike trainers, Coca- Cola, MTV. The most potent symbol of this process came last month with Rupert Murdoch's visit to New Delhi, to seek permission to expand his global television empire - a trip which generated the kind of attention last lavished on George V. Mr Murdoch came bearing gifts for the prime minister. They might have seemed an odd choice - five video cassettes of Spanish feature films. But one of the Prime Minister's intellectual pleasures is the Spanish language; one of his joys, the cinema.

PAMULAPARTI Venkata Naras imha Rao is the implausible leader of this economic and social revolution. He is 72 and a distinctly uncharismatic leader. He is clever, slight, gaunt and unsmiling. He speaks seven languages, but he is a poor orator at the mass rallies which are important in Indian pol itics, with none of the dynastic glamour which surrounded his assassinated predecessor, Rajiv Gandhi, or Rajiv's assassinated predecessor, his mother, Indira Gandhi, or her father (who died peacefully in bed), Nehru. Rao was born in 1921 in what is now the state of Andhra Pradesh in southern India. His family were farmers, but also Brahmins with a tradition of learning and literacy. Narasimha was educated at Bombay and Nagpur Universities and began his political career in the last years of the independence struggle against the imperial power. He rose through the district ranks of the Congress party, winning authority as an intellectual. He backed Indira Gandhi's new guard when she split Congress in 1969 and rose to the chief min istership of Andhra Pradesh, and a succession of cabinet posts in Mrs Gandhi's government.

His star faded with her death and he retired from politics, until the Congress Party, seeking a compromise candidate, brought him back in 1991 after Rajiv was blown up by a terrorist bomb in southern India. He had no great power base, but he was known to be loyal and steady at a time when, in the middle of an election campaign, his party was factionalised and close to hysteria. It looked then as though Congress might be swept aside in North India by the increasing potency of militant Hinduism in the shape of the Bhara tiya Janata Party (BJP).

Rao turned out to be more impressive than he looked and proved more than a stop-gap. His was a minority government and two crises nearly led to his downfall - the destruction by Hindu fanatics in December 1992 of a mosque at Ayodhya, and a banking scandal in Bombay. But Rao moved cannily and displayed ideological flexibility. By the end of last year he had re-established the Party's authority, ensured its absolute majority in India's parliament, seen support for the BJP wither, and turned around the economy after the country came close to defaulting on its international loans. Above all, he has restored a sense of decency to political life after decades of charge and counter- charge of bribery and corruption.

His achievements have rarely involved confrontation. Some in India say that his success has been by default, believing him prone to indecision and drift. His political philosophy seems based on the principle that the fewer decisions you make the fewer mistakes you risk. In seeking to accommodate all opinions, however, he has often satisfied none. After nearly three years in power, his cabinet remains notable for its weaknesses. It has no defence minister and there is no industry minister.

BUT WHAT Rao does have is a Finance Minister, Manmohan Singh. The reform of the Indian economy is not a single-handed affair. Mr Singh, a 61-year-old turbanned Sikh, has been the leading protaganist inside the government. Free-marketeers and trade- liberalisers in the West - the Wall Street Journal, the Financial Times - see him as a distinguished apostle of their own beliefs. He has come late to politics after a career in economics and banking: he was governor of the Reserve Bank, India's equivalent of the Bank of England.

Two years ago India was virtually bankrupt. Its foreign exchange reserves were exhausted and there were only enough funds for three weeks of imports. Singh turned to the IMF and World Bank for help and, with Rao's approval, began the systematic abolition of what Indians call the 'Licence Raj', where the state's bureaucracy had to be consulted (and often bribed) before the simplest and smallest business decision could be made.

The rupee was devalued and allowed to float, tariffs on imports were lowered, the tax system was reformed and the barriers to foreign investment were removed. The economy has taken off. The annual rate of growth is now around 5 per cent. British investment, for example, jumped from pounds 7m in 1991 to pounds 138m last year.

What this means for the plain people of India, and especially one-third of them, who live below the poverty line, is a different question. Mr Rao talks constantly about the 'middle way', a slogan which seems to mean reform with the least social and political upheaval. He is not an admirer of Thatcherism or the crude laissez- faire of Taiwan or Hong Kong. India's reforms, he says, are designed to alleviate poverty, not to boost the income of India's growing middle classes, which is what many critics claim.

He does not believe in the 'trickle-down' effect and argues that the economy is being liberated to generate economic growth. This, in turn, will increase government revenues that can be used to protect vulnerable groups in society. The Prime Minister is fearful of too rapid economic growth and has been criticised for failing to tackle India's vast public sector and its protective labour laws.

He is probably right to be cautious. India is a democracy. The poor may not have Nikes, but they do have votes. That cannot be said of China, where an author itarian government has, until now, been seen as the great protector of foreign investment: dictatorship equals stability. Is India, in J K Galbraith's famous phrase 'an anarchy that works', any less stable? Rupert Murdoch does not seem to think so, and neither does Richard Needham, the Trade Minister. Eighteen months ago Mr Needham was pointing British businessmen towards China. Now he is redirecting them towards India.

The country has even entered the consciousness of Lord Rees- Mogg and the Daily Mail. Writing in the Mail last week, Rees-

Mogg said that British trade should lift its eyes from Europe to its old stamping grounds in the subcontinent.

'The development of India as an advanced industrial nation,' he wrote, 'is one of the great world opportunities of the 21st century.' Rao can bask in these words this week in London. Not since the days of Robert Clive and Warren Hastings has his country been such a temptation for the West.

(Photograph omitted)