A research supported by the Australian government has produced a 500-page report on how to tap the Indian economy, in a bid to swing the country’s trade from an overdependence on China. At present, 24 per cent of Australia’s annual trade is with China, while only 3.6 per cent is with India. However, the report has a few standout conclusions.
An economic dialogue between the two leading democracies on both sides of the Indian Ocean is, of late, dominated by Australia’s desire to finalise a Comprehensive Economic Cooperation Agreement (CECA) and India’s businesses checking out the fate of Adani’s Carmichael coal project. Releasing ‘An India Economic Strategy to 2035’, Australian High Commissioner Harinder Sidhu said, “Australia remains committed to concluding a high-quality free-trade agreement with India.”
The report, written by Peter Verghese, former secretary of the Australian department of foreign affairs and trade and an old India hand (he was high commissioner from 2009 to 2012), notes, “projects such as Adani’s Carmichael mines are viewed (by Indian business) as a ‘test case’ for potential future investments — there is a view that this experience may lead Indian investors to put Australia in the ‘too-hard basket’.”
India has only shown sporadic bursts of enthusiasm on CECA arguing that Australia has only a few things to offer that can enthuse Indians to commit to lower duties on those. The report wants to dispel that notion drawing attention to a range of 10 sectors, ranging from education and financial services to health.
Canberra has enjoyed 27 years of uninterrupted economic growth in trading with East Asian economies such as Japan, South Korea and, more recently, China, mostly as a commodity exporter and buying their products in return.
But, as Sidhu reminded her audience, “An important insight from the strategy is to remind Australians that India will not likely follow the same model. Put simply, India is not China.”
For Australia this is frustrating. The report notes, “There is no market over the next 20 years which offers more growth opportunities for Australian business than India. Today, the risk is that we are not moving fast enough and Australia might fall behind.”
Australia has discovered there is no easy fit for India. Yet, given India’s rapid climb as an economy, Australia is keen to ramp up trade and investment relations.
The subtext of the report is also the rising discomfort in Asia about the Chinese clout in the region. Coincidentally, at another event organised by the Anantha Aspen Institute in New Delhi this week, former foreign secretary Shivshankar Menon said no Asian country wants to be too close to China or the US. “Each is playing a balancing game, often with contradictory positions,” he added.
Noting the increasing convergence between the India and Australia, especially in their quest to keep the Indian Ocean a zone of free trade, the report also offers defence cooperation as a possible pivot on which the two countries might move closer. “As regional security partners, with a growing strategic convergence, there is value in Australia and India exploring opportunities for enhanced defence industry cooperation. A positive strategic trajectory might also increase the appetite to share technologies,” the report says.
Sidhu said the reason the study was commissioned by Australian Prime Minister Malcolm Turnbull was simple: “India matters to Australia.” At the same time she also acknowledged that India remains a “challenging place” to do business for Australian companies.
“For a lot of Australian companies, the information about India is quite dated,” she said.
That perception is shared by India, too. “Outside areas such as resources, education, mining and, in a different sense, sports, India (as of now) does not naturally look to Australia as a first order partner,” Verghese’ report notes. Canberra wants New Delhi to change that perception.