Decoding the Australian Government's Ambitious India Economic Strategy Report

By IndraStra Global Editorial Team

By IndraStra Global Editorial Team

Image Attribute: The screenshot of the Report's Official Website

On July 12, 2018, A federal government's strategy report, titled — "An India Economic Strategy to 2035:  Navigating from Potential to Delivery" — was launched in Brisbane. This exhaustive 514-page report is packed with detailed analysis and going to become a "reference document" for the policymakers and academic researchers in coming years in providing the necessary directions to Australia-India relationship.

According to Australian Trade Minister Steven Ciobo, "the Federal Government commissioned this report to look beyond the immediate horizon and provide a roadmap for unlocking the opportunities that will help India and Australia grow together. It is about cementing India as a priority economic partner."

The author of this ambitious strategy report, Dr. Peter Joseph Noozhumurry Varghese, AO (Order of Australia), is a retired Australian diplomat and public servant of an Indian origin who has earlier served as Australia's High Commissioner to India from August 2009 to October 2012, with concurrent accreditation to Bhutan. He is currently serving as a Chancellor to the University of Queensland.

According to Dr. Verghese, over the next twenty years, India will need many of the goods and services which Australia is well positioned to supply. But over that time India will also become a much more crowded and competitive marketplace. Australia must prepare for that through a strategic investment in the relationship and a long-term and ambitious strategy led at the highest levels of government.

In the strategy report's introduction, Dr. Verghese starts with the following statement;  "Timing has always been a challenge in Australia’s relationship with India….Today the risk is that we are not moving fast enough and Australia might fall behind as other countries accord India a higher priority….We cannot afford to lose momentum or to assume that the logic of complementary interests will be enough to take the economic relationship to the level it needs to rise." (Introduction, Para 1, Page No:2)

The strategy report identifies ten key sectors — education, mining and natural resources, agribusiness, tourism, energy, health, infrastructure, financial services, sport, and science and technology; where Australia’s competitive advantages match India’s needs, and ten key states — Andhra Pradesh, Madhya Pradesh, Maharastra, Gujarat, New Delhi NCR, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal; in India as targets for collaboration based on their economic heft, commitment to reform, and relevance to the sectors in which Australia has competitive advantages. Key recommendations for these sectors and markets are detailed in the report.

The strategy report contains 90 recommendations. These recommendations are categorized as short, medium, and long-term. They are duly summarised and prioritized within the "Prioritising Recommendations" section of the report and also, each sectoral chapter contains detailed recommendations relevant to that sector. "This report recommends that we should strive by 2035 to lift India into our top three export markets, to make India 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." -  (Introduction, Para 4, Page No:2)

When it comes to Australia's view on current Indian leadership, the strategy report openly endorses Indian Prime Minister Narendra Modi with the following statement  "Drawing from his experience as Chief Minister of Gujarat for over a decade (during which time he built a business-friendly, outward-looking economic base for the state), Prime Minister Modi has pressed for an Indian federalism that is both cooperative and competitive; cooperative, in terms of better state-federal relations revolving around more fiscal devolution to the states and building consensus on the reform agenda; and competitive, in terms of heightened incentives for states to compete for capital and press ahead with reform. Prime Minister Modi sees this as a core element of India’s economic re-invigoration". (The Context of India's States, Chapter 14. A Collection of States, Para 4, Page No: 306)

The strategy report said it would see Australian exports to India grow from US$ 14.9 billion in 2017 to around US$ 45 billion in the next 20 year, and outward Australian investment to India rise from US$ 10.3 billion to over the US$ 100-billion mark. 

Figure 1: Australian Capex in India by Sector (January 2003 - September 2017)

Source: Fdiintelligence.com. 2018 [cited by the author on May 3, 2018] / (Foreign Direct Investment, Chapter 2. The Investment Story, Figure 21 Page No: 53)

Currently, some Indian companies are building investments in Australia from a low base in a few strategic areas: renewable energy followed by hydrocarbons, other minerals and a range of services (Figure 2). 

Figure 2: Indian Capex in Australia by Sector (January 2003 - September 2017)

Source: Fdiintelligence.com. 2018 [cited by the author on May 3, 2018] / (Foreign Direct Investment, Chapter 2. The Investment Story, Figure 21 Page No: 55)

Also, the report highlights the prominent Indian investors like Tata Steel, Adani Green Energy, Suzlon Energy, BlazeClan Technologies and the Indian Farmers Fertiliser Cooperative (IFFCO) who have been operating in Australia for quite a long time. Also, there is a subtle mention of "Carmichael Coal Mine and Rail Project" — which is viewed as a "test case" by Indian investors for potential future investments. The project is proposed by the multi-billion-dollar Adani Group and has been bracing protests across Australia for the last few years. There is a view that "on-going experiences being endured by Adani" may lead other Indian investors to put Australia in the "too hard basket" (Opportunities for partnership, Chapter 7. Energy Sector,  Page no: 178) and at the same time, it has a potential to hit Australia’s thermal coal exports to India, especially, when India’s rising coal imports are contributing to higher demand across Asia this year, which has pushed benchmark Australian coal cargo prices above $100 per tonne (May 2018), a price not seen at this time of year in more than half a decade.

According to Craig Jeffrey, Director, and CEO of the Australia India Institute; Professor of Development Geography, University of Melbourne "The strategy emphasizes two areas that need attention in order to meet these objectives. First, Australia needs to leverage the strengths of the Indian diaspora, which now numbers about 700,000. And, second, Australia needs to build more knowledge of India and support organizations that work on the bilateral relationship. While Australia made a pivot towards China in the last quarter of the 20th century, businesses, governments, and the public developed comparatively little knowledge about India".

He further adds, "The emphasis on China led to a neglect of India in education, media, and the policy sphere. There is a need to rebuild a public understanding of India and the institutions that can activate this understanding to achieve lasting impact. Culture and arts will be very important here, both as a sector and enabler - points implicit in the strategy."

Dr. Varghese says we need to move beyond constantly drawing comparisons between India and China. He writes, "The government has a role in raising awareness of the opportunities in the Indian market. This does not mean boosterism. We need to navigate between the hype that India is the next China and the outdated pessimism that India is just too hard." He further adds, "India needs to be understood on its own terms. It will always march to its own tune. It is the only country with the scale to match China but it will not be the next China."

In short, this report has a simple message — Indian economy is going through the transformational phase and there is no market over the next 20 years which offers more growth opportunities for Australian businesses than India. Its progress will be uneven but the direction is clear and irreversible. To realize these opportunities (current and the future ones), the strategy paper advocates for a strategic investment in India which is backed up with an ambitious, long-term and multidimensional strategy driven at the highest levels of the Australian Government.

Publication Details of the Report;

Download the Full Report

ISBN 978-1-74322-444-1 (book softcover)

ISBN 978-1-74322-447-2 (booklet)

ISBN 978-1-74322-445-8 (pdf)

ISBN 978-1-74322-446-5 (online)