In July I submitted to then PM Turnbull a report he had commissioned on an India Economic Strategy out to 2035.
Its key conclusion is that for Australia there is no single economy anywhere which offers larger growth opportunities in trade and investment than India. The report recommends that we should strive by 2035 to treble our exports to India making it Australia’s third largest export market, lift India to the third largest destination in Asia for Australian outward investment, and to bring India into the inner circle of Australia’s strategic partnerships,and with people to people ties as close as any in Asia.
The report sets out a detailed analysis of the drivers of Indian economic growth, the changes shaping its business environment and the complementarities between our two economies over the next two decades. It makes ninety recommendations designed to deepen the government to government relationship and to give Australian business a practical sense of how to take the relationship with India from potential to delivery.
India is already the fastest growing large economy in the world. By 2035 it is projected to become the third largest economy and it will have the world’s largest population well before then. Beyond scale and complementary economies, India also offers Australia an opportunity to spread our trade and investment risk in Asia.
The core of the strategy in the report is sectors and states. It identifies ten sectors where Australia has a measure of competitive advantage in a growing Indian market and also ten states in India where we should focus our efforts.
The sectors are divided into a flagship sector (education), three lead sectors (agribusiness, resources and tourism) and six promising sectors (energy, health care, financial services, infrastructure, sport, science and innovation). Each sector contains a detailed strategy.
The focus on ten states reflects the reality that India is best seen not as a single economy but as an aggregation of very different state and regional economies, each growing at different rates, driven by different strengths, led in different ways and likely to continue to be uneven in their progress.
India is not an easy market which is why there is still a “once bitten twice shy” attitude towards India in corporate Australia. Also, the scale of India and the rhetorical flair of its leaders can at times gloss over the challenges on the ground or the way in which India can test the patience of even the most committed. But India is changing, driven by the politics of aspiration, and a reform agenda which recognises the structural barriers to the ease of doing business. The key point is that today the balance sheet overwhelmingly favours opportunities over constraints.
The report places a high priority on boosting Australian investment in India: setting a target of increasing it ten fold by 2035. In virtually all of Australia’s relationships in Asia, investment lags trade by a wide margin. India holds out the prospect of being different. It has a relatively open foreign investment regime, more open than its trade policy. It has the rule of law. Its institutions are familiar to Australians, both derived from British models, and English is widely spoken – a very significant asset.
The Indian diaspora in Australia is given particular attention in the report because it may over time prove to be the most significant asset of all. Already 700 000 strong it is likely to grow more influential and engaged in the bilateral relationship, not least off the back of high levels of Indian migration and students as well as temporary entry by Indians with particular skills in IT and finance.
Taking the relationship with India to the level it deserves is a long haul journey. It will take leadership, time, effort and consistent focus.
No strategy goes exactly to plan. All strategies have to be nimble enough to adapt to the unforeseen. But the logic of a strategic investment by Australia in the relationship with India is compelling. If we get it right we will both enhance the prosperity and security of Australians and help realise the aspirations of the 1.3 billion Indians who sense their time has come and a better life is within their grasp.
Peter Varghese was the Secretary of the Department of Foreign Affairs and Trade from 2012 -2016 and Australia’s High Commissioner to India from 2009-12. He is currently the Chancellor of The University of Queensland.