India’s human capital: A gift that keeps on giving

Jun 16, 2020

India is now Australia’s largest source of skilled migrants, the largest provider of temporary skilled specialists and second-largest source of overseas students.

The reason for the surge is that, from the arrival of the First Fleet to this day, Australia has had a chronic people shortage, which India today is best placed to provide.

Our small population means that we can never achieve self-sufficiency and attracting migrants has been the only solution. Before World War II, most migrants came from the UK and Ireland, then from continental Europe. But, when these countries were unable to meet our growing needs, Australia turned to the populous countries of Asia, especially China and India, something it was able to do thanks to the scrapping of the White Australia Policy.

India’s working age population will soon be the world’s largest, a position it will retain indefinitely. As it is unable to absorb its entire influx of workers, other countries including Australia, are able to benefit from its surplus. Australia values the English language competence and the many essential skills that Indians can provide. Moreover, Indians are valuable workers because, in addition to being willing to do whatever work needs to be done, they are also ambitious, innovative and entrepreneurial, proof of which is their crucial contribution to the creation of Silicon Valley.

India’s is a gift that keeps on giving and will continue to benefit Australia for generations to come. Its contribution goes well beyond permanent migrants. India is now the largest source of temporary specialists and offshore services. While the use of both these labour sources have been somewhat controversial, the reality is that no advanced country, let alone a nation as small as Australia, can do without them.

Temporary Indian residents also make ideal migrants and citizens. It is good that we currently comfortable with temporary work visa-holders moving to permanent residence (PR) and citizenship and provide pathways to PR, for Indian students as well, although these could be improved because they are now both slow, cumbersome and expensive. We could and do much more to encourage them to stay and avoid chopping and changing the rules as often as we now do.

Let us consider those on the temporary work (457) visa first. I must confess my personal bias as I chaired the inquiry (the Roach Committee) that resulted in its introduction. It has served Australia very well. Without it, we could never have been able to meet the extraordinary demand for specialists caused by 20 years of economic growth, especially in the mining and construction boom, the opening of financial services and the exponential growth in the use of IT.

With offshoring, the misconception is that it only benefits the resource providing country, not the using one. However, research in the US, the world’s largest user of offshoring, shows that over time the customer’s economy benefits most. Access to high-quality resources at a competitive cost justifies many more projects, which accelerate productivity improvements, helping businesses to survive and thrive. Over time, more jobs are saved and more created.

Offshoring of services is also an inevitable result of globalisation. Our offshoring of manufacturing has demonstrated this. Allowing much of our manufacturing to wind down and focusing on a few select areas where we have sustainable competitive advantage was a smart move. It has brought considerable benefits to the rest of Australia’s economy, especially businesses that use manufactured goods as inputs, and consumers.

The decline of manufacturing accelerated the transformation of Australia into a services economy, underpinned by mineral and agricultural resources. Services now provide 70% of GDP and 80% of jobs. Australia’s per capita income has risen and, without downplaying the hardships of retrenched workers, their jobs were unsustainable. Many have found alternative employment, new jobs have been created, overall employment has risen, and unemployment is at historic lows.

Now Australia faces another mega-trend, global services delivery, which means we must transform our economy again. Many services, which seemed protected because they could only be delivered locally, are now tradable, thanks to the internet and robotics. Discouraging offshoring, or subsidising local services, may preserve local jobs for a while, but, as our automobile industry experience has taught us, such measures are not sustainable.

Australia’s challenge is to focus on those services where we are globally competitive, including those that physically protected – tourism, hospitality, entertainment, retail and construction; those in industries where we have special advantages, e.g. mining and agriculture; or those in which we have proven excellence, e.g. food, wine, health, financial services, education, research and sport. Australia also needs to form strategic relationships with other countries to enhance our strengths and capabilities.

Given that most industries crucial to our future prosperity will need more skilled resources than we have and will require globally traded services as inputs, India, with its abundant workforce, stands out as the ideal partner.

It also helps that we have abundant mineral and agricultural resources, which India needs to fuel growth and feed its people. Its burgeoning workforce also requires education and training. We have a proven record in educating international students. We must now start delivering our world-class vocational training system in India, where some 300 million people need training over the next several decades.

Our mutual dependence should help develop a mutually beneficial partnership founded on mutual respect. The human dimension is unquestionably the most significant. We should acknowledge, appreciate and value the fact that India’s people are a priceless gift that keeps on giving.

This is an updated and abridged version of an article originally written for the Australia India Institute book ‘’Hullaballoo” in August 2014

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