There’s plenty of action between Australia and India, and foreign businesses are finding it's worthwhile to settle in for a long innings, writes Tim Harcourt.
Image: Adobe Stock / muratart
Prime Minister Anthony Albanese visits India this week at the same time as Australia is playing a test series in the sub-continent. They used to say Australia’s relationship is more than the 3’c’s – cricket, curry and commonwealth, but cricket is often a great ice breaker for deepening the bilateral relationship. In fact, Albanese’s image and that of Indian Prime Minister Narendra Modi will be on display for the 4th cricket test in Ahmedabad.
Cricket always seems to come to the fore when I travel to India. I can never forget my first visit to Mumbai – the amazing gateway to India where fame and fortune mingle with a mass of humanity. With billionaires and Bollywood, Mumbai has it all from mega rich modern-day Maharajas to slum level poverty. And in some ways, it is also a symbol of India’s rise in the 21st century. I was there on a New South Wales (NSW) trade mission led by then Premier Bob Carr.
I was able to watch the fourth day of the test in Mumbai, and see Australia achieve a rare victory in the series in India by three test matches to one. However, in return for tickets to the cricket I did have a job to do. Bob Carr and Penny Wensley, the Australian High Commissioner to India and later Governor of Queensland, asked me to look after an Indian gentleman when the delegation was late.
When I walked into the room, the Indian gentleman was there. We started talking. He seemed a nice man. I asked him what he did for a living. He said he had a little computer company, which he started with a loan from his father in law who was reluctant to give it to him because he was a communist.
When the Premier and the High Commissioner arrived, I realised this nice softly spoken Indian gentleman was Mr Murthy, the founder of Infosys, in effect the Bill Gates of India, the father of the Indian IT sector and one of Fortune magazine’s top 12 greatest ever entrepreneurs. He also happens to be the father in law of the Prime Minister of the UK, Rishi Sunak.
He then gave the delegation an amazing presentation about Infosys and the Indian tech sector and its vast sophistication. This illustrated to me the new India and the fact that Australia’s trade relationship with India was moving beyond ‘rocks and crops’ – resources and agriculture.
I later returned with South Australian Premier Jay Weatherill, but unlike Bob Carr, Jay is a cricket fan, and managed to persuade the Indian cricket authorities to base their team in Adelaide for the Cricket World Cup and play the India-Pakistan match at the re-developed Adelaide Oval. It was a stroke of genius as it became the most watched cricket match in the world with fans travelling from as far as Toronto, Canada to Adelaide to be part of that amazing crowd.
And on another visit, on return to Mumbai to film The Airport Economist, it reminded me of how much modern India has changed and how that’s accelerated under the ‘make in India' program of Prime Minister Modi. In fact, there was a time not too long ago when foreign business eschewed India, but India is now emerging as one of the world’s economic superpowers. You can’t pick up a financial paper in the world without comparison between India and that other populous Asian super power, China.
That’s not surprising because in terms of numbers, Mother India is on the rise again. It is becoming a significant economy on the world stage despite some mega challenges. After all, India is the second most populous country in the world with almost 1.3 billion people. In terms of GDP it is in the top 10 economies in the world but because of its large population it doesn’t even make the top 100 in terms of GDP per capita. It’s been growing at over 7 per cent a year (is currently just a tad below at 6.8 per cent a year) and could grow without its infrastructure bottlenecks holding back capacity. India’s labour market is teeming with young workers – around 50 per cent of India’s population is under 25. However, most workers are in the east of the country and the jobs are in the west, so India needs to handle significant internal labour migration.
After years of economic nationalism of the Nehru-Gandhi dynasty (in a backlash to British rule), India started to open up its economy under Finance Minister (and later Prime Minister) Dr Manmohan Singh and soon we saw Indian companies like TATA, Infosys, Mittal Steel and Dr Reddy’s labs dominating international financial headlines. Unlike China, which relies on state-owned enterprises for outward investment, India built up its own home-grown private sector with Indian companies that are big players on the global scene. And Prime Minister Modi has accelerated the expansion of those Indian companies at home and aboard.
This is not entirely new, as the Indian sub-continent has been a magnet for commercial and cultural wealth and a centre for the world’s trading routes for centuries. In fact, up until 1700, India (and China) dominated world GDP. From then on India came under the control of the British East India Company and despite the rebellion of 1857, it took almost another century until the successful non-violent independence campaign of Mahatma Gandhi to finally throw off the British yoke in 1947.
After 1947, India ran an economic nationalist policy of protection, regulation (carrying on the licence of the British Raj) and joined the non-aligned movement favouring neither the USA nor the Soviet Union.
However, despite national pride at ridding themselves of the British, an independent Republic of India struggled economically. The protected industries struggled despite planning and the aspiration of self-sufficiency and the poor suffered. By 1981, 60 per cent of Indians lived under the poverty line and it took the Manmohan Singh reforms and India’s embrace of the global economy to get that down to just over 16 per cent today.
While China positioned itself as the world’s factory with a concentration in manufacturing, India positioned itself as the world’s lab and call centre with a concentration in telecommunications, pharmaceuticals, IT as well as traditional agriculture and some high value manufacturing in the automotive and computer sector. India also exports its human capital with 25 million Indians working abroad from software engineers and programmers in Silicon Valley to construction workers in Abu Dhabi and Dubai.
The Modi Government programs under the 'Make in India' banner are making a difference for India. According to Andrew Groth, Infosys Senior Vice President, one of the government programs, Digital India, means “there are 20,000 tech start-ups supported by the Government of India and the Infosys Corporate University’s incubator program.”
He also cites the Smart Cities program as well that targets 100 cities in India to use digital technology to provide health, safety, education and transport services to its citizens. Sundi Balu of Telstra also points out how there is digital revolution in agriculture “with our digital platforms helping farmers, in terms of logistics and pricing along with other B to C applications. With 200 million smart phone users in India the country has already been transformed in a short space of time.”
Telstra and Infosys have teamed up in India joining forces to take advantage of their comparative advantages. Andrew Groth explains that “we wanted to take advantage of foreign experience and expertise rather than capital.”
India also needs skills. Only 25 per cent of Indians have higher education and Australia could provide up to 14 million tertiary places for India. This is important as India is aspirational. Young middle-class Indians have seen the world progress with globalisation, and they want to be part of the action and lead the way.
Joint partnerships between Australia and India include a Centre for Water Excellence and Management between the States of South Australia, Rajasthan and South Australian Company Hydro-dis which manufactures water technology, and Art Lab South Australia also assisted in cultural collaboration in the restoration of the sari of India’s late Prime Minister Mrs Indira Gandhi.
As Dr Prince Augustin of Mahindra and Mahindra told me: “India is no longer the land of just snake charmers and elephants and big dominant industries. If you have entrepreneurial skill and are willing to partner there are big opportunities to be had in autos, aviation, defence, mining, services and education. But it is for test match players not 20/20.”
So, there’s plenty of action going on between Australia and India and foreign businesses are finding it can be worth it to settle in for a long innings. Of course, you have to be aware of the red tape and you may find the extremes of great wealth and great poverty confronting, but India for work or play is a life changing experience. And you need good advice in business in case you find yourself on a sticky wicket. Enjoy the mission – and the cricket – Mr Albanese.
By Professor Tim Harcourt
Industry Professor and Chief Economist
Institute for Public Policy and Governance (IPPG)