With an ethnically and religiously diverse population of 1.2 billion people, India is the world’s second most populous nation. India’s population grows by the equivalent of Australia’s every year. Its land area is around 40 per cent of Australia’s; it has 7,000 kilometres of coastline and over 14,000 kilometres of land boundaries with six other countries.
The Indian economy has become one of the world’s best performers, with average annual GDP growth of more than 8 per cent over the past ten years, although IMF forecasts are for slower growth in 2013. In 2011, India became the third-largest economy in the world (in PPP terms). However, around 500 million people in India still live on less than US$1.25 a day, and India’s GDP per person (in PPP terms) was less than half that of China. The middle class is growing rapidly and is expected to number more than 250 million people by 2015.
India's astounding demographics
Half of India’s people are under 25, and India is projected to add 12–15 million workers to its labour force every year over coming decades. The Indian Government has set an aspirational target of providing skills training to 500 million workers across 30 sectors by 2022.
Urbanisation has been rapid; while only 30 per cent of Indians live in urban areas, urban migration and the creation of new cities are expected to lift that figure to over 50 per cent by 2050. There are 53 urban centres with more than one million people. The Indian Government has estimated that US$1 trillion needs to be spent on infrastructure between 2012 and 2017 to keep pace with the country’s modernisation.
Urbanisation and industrialisation are creating demand for Australian resources, as well as Australian financial, construction and logistics services. Australian education providers are seeking to be involved in addressing India’s training needs. Agribusiness opportunities may also open up as consumption patterns change with growing wealth.
Australian ties with India are longstanding. Diplomatic relations were established before Indian independence in 1947 and Australia appointed its first High Commissioner to India in 1944. India opened a trade office in Sydney in 1941 and appointed its first High Commissioner to Australia in 1945.
In the decades that followed, Australia and India enjoyed a friendly but undeveloped relationship. The two countries met on the cricket pitch and in the councils of the Commonwealth, but economically and strategically our paths rarely crossed.
Since India’s historic decision in the early 1990s to open its economy, the interests of Australia and India have converged in many areas, driven by complementary trade and investment imperatives, a largely shared geostrategic agenda in Asia and the Indian Ocean, mutual work in multilateral forums, and rapidly growing people-to-people links. Australia and India’s converging interests offer an opportunity to build a strong strategic partnership and a more diverse economic relationship.
Government, business and people-to-people links
India stands in the front rank of Australia’s international partnerships. In 2009, the Australian and Indian prime ministers agreed to upgrade relations to a strategic partnership. Deeper bilateral, regional and international cooperation is now being pursued in many fields, including on strategic and security matters.
The commitment by the two countries to expand and deepen the strategic partnership, and therefore to seek out new opportunities to work together, was re-affirmed during the Prime Minister’s state visit to India in October 2012. A number of bilateral arrangements designed to increase co-operation in specific fields (such as wool, civil space science collaboration, skills development and student mobility) were also announced.
The Indian Government welcomed the decision of the Australian Government, announced in October 2012, to allow sales of uranium to India. A new Water Technology Partnership sharing river basin modelling technologies was also announced, with this partnership building on our existing collaboration in this field.
Australian representation in India has increased by 85 per cent since 2009. The network of 11 Australian offices, including the High Commission in Delhi, the Consulates-General in Chennai and Mumbai and eight small trade offices, gives Australia one of the widest diplomatic footprints of any country in India. Thirteen federal government agencies work in the Australian High Commission, and five of Australia’s six states have their own offices in India.
Australia’s trade and investment links with India are the backbone of the bilateral relationship. India remains Australia’s eighth-largest trading partner, with two-way trade valued at $18.3 billion in 2011-12. India is now the fourth-largest destination for Australian exports of goods and services. In 2012, Australia was India’s largest supplier of coal and wool, the second-largest supplier of copper ores and the fourth-largest supplier of gold.
The number and value of Indian investment proposals continue to increase, making India the fifth-largest source of proposed investment in Australia. The Foreign Investment Review Board approved 319 Indian investment proposals, worth over $11 billion in 2010 -11. Almost $9 billion of this was in the resources sector. Major Indian conglomerates are developing mining assets and infrastructure in Australia. All of the major firms in India’s world-leading software and IT industry are represented in Australia with a small but growing market presence. There are around 150 Australian companies with a corporate presence in India, similar to the total number of Indian companies in Australia.
The Australian and Indian Trade Ministers launched negotiations on a Comprehensive Economic Cooperation Agreement in May 2011 to provide a pathway towards closer economic integration between the two countries. In 2012, Australian and Indian business leaders held the first two meetings of the Australia-India CEO Forum in Delhi.
Converging strategic interests mean that Australia and India are engaging closely in regional and global forums. As the current chair and vice-chair of the Indian Ocean Rim Association for Regional Cooperation, India and Australia work together to address challenges in the Indian Ocean. Priority areas include fisheries management, trade facilitation, disaster risk management, and maritime safety and security. The two countries also work closely in the East Asia Summit (EAS) and the G20, as well as in regional bodies such as the ASEAN Regional Forum, the South Asian Association for Regional Cooperation and the Asia–Europe Meeting.
Defence cooperation is deepening, particularly in the maritime sphere. In 2006, a memorandum of understanding on defence cooperation was signed. In 2009, the announcement of the new strategic partnership was accompanied by a declaration on security cooperation. A 1.5 track Defence Strategic Dialogue was held in July 2012.
Government-to-government links are close, with a high tempo of bilateral visits, including the Prime Minister’s visit in October 2012, during which the two Prime Ministers agreed to annual leaders meetings either bilaterally or in the margins of international meetings. Ministers from portfolios including foreign affairs, trade, defence, resources and education also meet regularly.
People-to-people links are expanding rapidly. In 2011, the estimated Indian community in Australia was around 450,000 people, including both permanent residents and temporary visa holders. India has been in the top three source countries for temporary and permanent skilled migration for the past several years.
Tourist flows in each direction are growing. India is now the tenth most popular destination for Australian travellers, with 186,000 Australians departing for India in 2011-12. Around 152,000 Indians visited Australia in 2011-12, including holiday makers, business visitors and Indians visiting their families. India was the 11th largest source of arrivals in Australia in 2011.
Education is a pillar of the relationship. India is the second-largest source of international students in Australia. There were 29,500 Indian student visa holders in Australia as at 31 December 2012 and 26,933 Indian students enrolled across all education sectors as at February 2013.
From October 2012 to January 2013, the Australian Government mounted Australia’s largest-ever cultural promotion in India. Oz Fest was held in 18 locations across the country and targeted both India’s young, aspirational, educated, urban population and established opinion- and decision-makers. It sent a strong message about the capabilities of contemporary Australia. Its business programs and other events profiled Australia’s energy, resources, education and tourism sectors and demonstrated expertise in science, technology and knowledge industries.
A number of other bilateral initiatives and bodies bolster the relationship. Australia and India work closely together on a range of sustainable development issues, including on water issues and through joint scientific research. The Australia-India Education Council and the Australia India Bureau for Vocational Education and Training Collaboration are facilitating education, skills and research connections. The Australia-India Strategic Research Fund is Australia’s largest bilateral science fund and one of India’s largest sources of support for science. It supports joint research on shared challenges in fields such as energy, food and water security, the environment and health. The Australia-India Council promotes the bilateral relationship by supporting engagement across a wide front, increasing levels of knowledge and understanding and building stronger people-to-people and institutional links between the two countries. The council celebrated its 20th anniversary in May 2012. Other bodies, such as the Australia India Institute, launched in 2009, and the Asia Education Foundation, also build critical people-to-people links.
Australian and Indian interests are likely to converge more closely in the years to 2025. Both nations are working for an outward-looking and inclusive Asian region; both want stability in the Indo-Pacific region; both are liberal democracies; and both have federal systems of government and a similar legal heritage.
There are opportunities to strengthen the strategic partnership through the East Asia Summit and to cooperate in the Indian Ocean including on enhanced maritime security. Australia and India also share an interest in embedding the G20 as the premier global economic forum.
Economic complementarities will drive the relationship forward in the medium term, as India’s large-scale urbanisation and industrialisation and Australia’s reliable supply of resources and education services make us natural partners. But the trade relationship will also grow and diversify in areas where Australian expertise is recognised in India. Likely areas for cooperation include bilateral investment, public sector and broader regulatory reforms, and education engagement, especially vocational education and training. India’s underdeveloped financial services sector will provide opportunities for Australian firms.
A growing Indian middle class will be a focus for Australia’s tourism sector. As a result, people-to-people links are likely to grow, especially in education, sport, science and technology and youth exchanges. Growing links in the film and audio-visual sector will also lead to increased interest in each other’s country and culture. For example, there is growing interest from Bollywood in shooting movies in Australia. Australian universities are increasingly looking to include overseas components in their undergraduate degrees, and in this regard India would be a natural fit because of common language and a similar educational heritage.
Changing consumption patterns and food security concerns may provide further openings for Australia’s agricultural industries. Australian expertise in water resource management is well recognised in India, and provides prospects for engagement on a matter of critical importance in India. Scientific advances in Australia could be of commercial interest to India, particularly in the areas of renewable energy, conservation agriculture and water. Science and research collaboration will continue, and engagement on resource and energy security will broaden and deepen.
Opportunities to collaborate with India as an emerging donor could be pursued. India and Australia each have comparative strengths as providers of development assistance (such as on water, agriculture, and human resource development) which could be jointly applied in South Asia or other parts of the world. As India develops an even bigger development program, cooperation may also grow on aid policy including donor harmonisation and other priorities like gender equality