Australia’s Prime Minister Scott Morrison is seen with India’s President Ram Nath Kovind during talks in Sydney on Thursday.
India has long suffered from the ‘next big thing’ tag put on it by over-eager foreign investors and exporters hoping to find another China in the sub-continental giant. But the country is now closer to deserving the label than it ever has been in the past.
India is too different and complex to be anything other than the next India. For Australia, it’s unlikely to become the massive destination for resource exports that China’s industrial revolution has been. India’s economy is driven by consumers rather than investment, and a market until recently turned tightly inwards with a well-earned reputation for being difficult to do business with.
But four years of the modernising government of Narendra Modi has begun rapidly collapsing old stereotypes about red tape, corruption, and endless pitfalls and disputes for investors. No other single country offers Australia the same complementary economy model that we found in China two decades ago. Instead of selling iron ore, India offers inward investment for education, financial services, infrastructure expertise, health care, high-end food, and even sports management.
In most of Asia, our investment lags behind our trade. But India has a relatively open investment regime, more so than its trade policies. Now New Delhi is making life easier at the operating level too. It is one of the five fastest movers up the ease-of-doing-business rankings published by the World Bank, and is now in the top 100 countries. Its growth is being pushed along by raw weight of numbers: Japan’s working population has shrunk, China’s is shrinking, but a fifth of the world’s workers will be Indian by 2025. Even if growth moderates to 6 per cent the economy will still double in size within two decades. Regional terminology has changed to reflect it. The Asia-Pacific has become the Indo-Pacific, and Indian diplomats say that our tacit strategic relationship in the Quadrilateral dialogue helps business perceptions of Australia too.
This week the government published a 500-page road map by respected former diplomat and public servant Peter Varghese that shows how 10 industry sectors could drive a 10-fold increase in the economic relationship by 2035, from $10 to $100 billion. At The Australian Financial Review India Business Summit yesterday, Prime Minister Scott Morrison accompanied by the President of India Ram Nath Kovind, announced the government will adopt Mr Varghese’s 20 leading recommendations. Parallels are already being drawn with Ross Garnaut’s 1989 report which gave Australia a liberalising blueprint to lock itself into the booming new export economies of northeast Asia: Japan, South Korea and eventually China. Writing in these pages on Tuesday, Mr Varghese says that India now offers Australia a chance to spread its trade and investment risk beyond those markets. Our prosperity over the last 15 years has been leveraged to China, but just as Donald Trump’s trade wars threaten to expose its vulnerabilities.
And it’s hard to understate the old blockages that Mr Modi has removed from his economy. GST reform consolidated multiple taxes that plagued investors. New bankruptcy laws have moved India from a socialist economy towards a more investor-friendly market economy. The controversial 2016 demonetisation at least attempted to roll the black economy into the open one.
One Summit speaker suggested that lack of conduciveness to doing business is no longer a reason not to try India. But it remains a challenging place. The Varghese program, though excellent, has to fill in for an elusive free trade agreement. An FTA was sidelined by India to protect its farm sector, while the free movement of labour sought by India would be tricky here.
Australia’s best-known recent Indian expat, the Indian-born but UK and Australia resident Sanjeev Gupta of Liberty House, busy transforming the Whyalla steel industry, is now taking the diaspora route back to investing in bankrupt steel plants in his homeland too. “Don’t oversell the country”, he warns. It is a complicated place that needs patience and good advice. “But, look at the pure mathematics”: the levels of growth and the demographics, he urges.
We have commonalities in strategy, democracy, and culture that deepen our relationship. And we have complementary differences that allow us to exchange trade and investment. There is no sounder base for the Varghese report to build on.
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