India redux

It’s time for Australia to appreciate that a resurgent India is not China 2.0 and that the opportunities offered by a rethink of our bilateral trade relationship are potentially huge, writes Australia India Institute CEO Lisa Singh.

With the geopolitical turbulence from Australia’s souring relationship with China to the outbreak of the Russian invasion in Ukraine, to the impact of doing business through a pandemic, the opportunities and challenges in 2022 are immense. The key for directors trying to take advantage of managing the risk of China is to diversify — and the obvious choice is India. Yet it is still surprising how some Australian businesses are unaware of just what that opportunity looks like and the huge moment in front of us.

Of course, an economic pivot to India won’t succeed unless both countries lay the right foundations and policy settings to enable such an opening. That is why the outcomes of the recent second leaders’ summit of Indian and Australian prime ministers were so important. Delivering closer bilateral ties in trade, critical minerals, migration and mobility, and education, as well as reducing trade barriers, will all help drive a deeper economic relationship and open up new markets for businesses and people in both countries.

Addressing some of the biggest global challenges — including the ongoing repercussions of the pandemic, climate change, cybersecurity and the growing geopolitical uncertainty to economic stability — are critically important for governments and business to focus on right now. But these challenges need to be seen as opportunities to find new markets.

For example, one of the biggest challenges for companies exposed during the pandemic was the huge disruption to global supply chains, logistics and manufacturing activities. Companies were forced to look at alternative markets for materials — and countries that had become reliant on raw materials for certain products realised they needed to begin producing such materials themselves. The key lesson for companies is to strengthen their resilience so that risks previously deemed implausible are now planned for.

India-Australia relations

The pandemic has made both countries and companies realise they need to maintain a state of preparedness and engage with like-minded friendly nations. India fits that bill.

India is a like-minded country with one of the youngest populations in the world. It has strong democratic credentials and shares many institutions with Australia — usually derived from British models. Some of the biggest companies in the world have Indian-born CEOs, including Google, Microsoft, Twitter, IBM and Adobe. India’s economy is expected to grow to 8.2 per cent this financial year, the most of any large economy. Innovation and entrepreneurial spirit in India are at an all-time high and as of January 2022, India has 83 unicorns and at least 14,000 startups.

It’s no secret that India presents huge trade and investment opportunities for Australian businesses. The investment chapter of the India Economic Strategy, authored by former High Commissioner to India and former DFAT Secretary Peter Varghese AO, highlights the sheer potential of India.

The recently signed Australia-India Economic Cooperation and Trade Agreement (ECTA) provides momentum for strengthening trade links and greater market access to exporters in both countries. Now is the time for directors to start pivoting to India.

Systematic targeted efforts are being made by the Indian government to make it easier to do business in India — to reduce the number of processes and average time taken, and to rationalise costs. These structural reforms to allow for the ease of doing business have seen India jump from 142nd in the World Bank’s “Ease of doing business” index in 2015, to 63rd among 190 countries in 2020.

The recent update to the India Economic Strategy by the Australian government further presents new opportunities for Australian directors across a range of sectors, particularly in clean and renewable energy technology, critical minerals, space investment and infrastructure. But the success of these new policy reforms won’t be realised unless India literacy is improved within Australian companies. A deeper understanding of India — that goes beyond cricket — will help companies understand how they can tap into the large potential that doing business with India offers, and to dispel the myth that doing business in India is too hard.

The importance of India literacy and the scale of opportunity in doing business in India was explored at the IES update launch hosted by the Australia India Institute. “If you’re sitting on a board table and you haven’t talked about India for a long time, you probably need to give yourself a bit of a kick, because where [else] is the market growing at nine per cent off a $3 trillion base?” said Jennifer Westacott AO FAICD, Business Council of Australia CEO. “If you’re not doing your work as a company, you will miss that moment.”

What is clear is that if the next era of economic growth in Australia does not include India, it will be an opportunity lost for Australian business that countries including Canada the UK and US are already taking up. Where once Australian directors may have asked, “Why India?”, today they should be asking, “Why not India?” Now is the moment.

The India market opportunity

Entrepreneurship: India now hosts more than 80 unicorns — startups with a market value of over US$1b — more than half of which were added in 2021. Computer and information services are India’s top services exports, worth almost US$134b in 2020–21.

Students: 19 per cent of overseas students in Australia were Indian in 2021.

Population: By 2024, India is forecast to become the world’s most populous country. A young demographic, burgeoning consumer class, more people employed in formal work, mass uptake of technology, significant infrastructure investment and rapid urbanisation will drive growth.

Tech/innovation: India is one of the world’s largest and most dynamic technology and innovation ecosystems. By 2025, India will have 900 million internet users and a US$1 trillion digital economy.

Indian companies in Australia: Indian technology giants such as TCS, Infosys, HCL, Wipro and Tech Mahindra have large operations in Australia, employing primarily Australian citizens and driving improvements in national productivity.

Doing business: India is the fastest- growing economy in the world, ranked at 63 on the World Bank’s “Ease of doing business” index in 2020.

Energy: Australia has reserves of many critical minerals identified by the Indian government as crucial for the production of wind turbines, electric cars and solar panels. Australian companies with expertise in renewables development and grid management are well placed to engage.

Diaspora/business: There are an estimated 2840 directors and managers of Indian heritage out of a total of more than 20,730 working in Australia — more than 10 per cent of the total. The diaspora represents approximately three per cent of the Australian population overall.

Source: DFAT India Economic Strategy to 2035