Geoff Hiscock. Onus on Abbott to forge closer ties with India

May 30, 2014

​As a young man, Tony Abbott backpacked across India in 1981, and spent six weeks at the Australian Jesuit mission in Bihar state. He was fascinated by the country’s many contrasts, from its bullock carts to its nuclear power stations.

His Indian exposure since then has been limited, but the Australian Prime Minister says he has always taken India seriously and has made it clear in his speeches and his interaction with the Indian community in Australia that he wants a much closer and deeper relationship.

With Narendra Modi as India’s new leader, he has chance to do just that. Abbott was quick to call Modi and congratulate him when his Bharatiya Janata Party (BJP) scored a decisive electoral victory earlier this month, saying on May 17 that he looked forward to strengthening ties between the two countries.

Modi’s priorities, of course, are not the same as Abbott’s. Modi lives in a much more volatile world, where relations with Pakistan, China, Sri Lanka, Bangladesh, Myanmar, Nepal and Afghanistan take precedence, and where domestic terrorism, social stability, food and energy security, job creation, infrastructure development and health issues are of overwhelming importance.

Still, like Abbott, Modi is conservative, pragmatic and pro-business, with a mandate to get things done. Abbott and Modi may not otherwise be natural soul mates, but Abbott is eager to turn what he calls a “neglected” Australia-India relationship into something much more substantial and balance it against the other Asian heavyweight, China, in the areas of trade, strategic cooperation and people to people ties.

India’s GDP of $1.8 trillion lags well behind China’s $10 trillion, but with an economic pick-up on the cards and a growing middle class of several hundred million out of a total population of 1.25 billion, India is a target market of considerable size.

For Australia, there is potentially much more trade in energy and resources (including ultimately, uranium) and agribusiness, and in services such as education, engineering and finance. For India, there are opportunities in manufactures such as medicines, jewellery and motor vehicles and in services such as tourism and information technology. In terms of direct foreign investment, India already has built stakes in Australian coal mines, other metals and food.

The raw statistics show just how much work remains.  Australia’s total two-way trade in goods and services runs at about $625 billion a year, but India accounts for only about $17 billion of this, or less than 3 per cent. That is roughly the same amount of business Australia does with Malaysia, but is way behind trade with the big four of China ($150 billion), Japan ($70 billion), the United States ($54 billion) and South Korea ($30 billion). Even Singapore ($27 billion), New Zealand ($21 billion) and the UK ($19 billion) rank ahead of India among Australia’s main trading partners.

In his first major foreign policy speech in Melbourne last year, Abbott ascribed the relatively modest trade flows partly to “India’s long preoccupation with the non-aligned movement and statist economics; and partly because of Australia’s historical amnesia and fascination with China.”

Certainly Australia’s economic relationship with China has rocketed ahead in the past two decades and it would be fair to say that while Abbott is a little more wary of China than his recent predecessors Julia Gillard and Kevin Rudd were, he has continued the fascination. In April Abbott led a large trade delegation to China, Japan and South Korea; at the Boao Forum on the Chinese island of Hainan, he told his hosts: “Australia is not in China to do a deal, but to be a friend. We don’t just visit because we need to, but because we want to.”

His avowed goal is to add a China free trade agreement as quickly as possible to those already signed with Australia’s two other big North Asian trade partners. So far, we haven’t seen much sense of urgency about a free trade agreement with India, though in 2011 Australia and India did begin negotiations for an FTA-style “comprehensive economic cooperation agreement.”

But it’s not an “either-or” thing with China and India. There is ample opportunity for Australia to grow its business ties with India without threatening anything it has with China. The first step is for Abbott to build some personal rapport with Modi and to take any residual heat out of the relationship left by past kerfuffles over perceived discrimination and the attacks on students in Melbourne.

Unless Abbott can shuffle his packed schedule to squeeze in a visit to India in the next few months, it is likely his first chance to meet Modi as Prime Minister will be at the G20 leaders’ summit in Brisbane in November. Before that, Australia will host the G20 trade ministers’ meeting in Sydney in July, with India’s new Trade Minister likely to attend. At both these events, the focus will be global rather than bilateral.

In Melbourne last December, Abbott observed that “no one should underestimate India now, nor its potential to be a global superpower in this century.” His challenge – and to a lesser extent that for Modi – is to expand trade, investment and defence ties, and nurture some new areas of mutual interest that go beyond the old staples of democracy, rule of law, the English language, and a love of cricket.

Geoff Hiscock writes on international business and is the author of several books, including “Earth Wars: The Battle for Global Resources” and “India’s Global Wealth Club,” both published by Wiley


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