An investment-led strategy for building Australia-India economic relations
By Sonia Arakkal
India’s size and economic dynamism presents a major opportunity for Australia. As the rise of Japan, Korea and China did in previous decades, building an Australia-India economic relationship will fundamentally reshape Australia’s integration in the Indo-Pacific. In 2018, the Australian Government released an India Economic Strategy (IES) that recognised the opportunity and mapped out ‘the where and the what’ for the future economic relationship. Our focus must now turn to the how.
Building a successful economic relationship with India will require Australia to adopt new approaches. In previous relationships with Northeast Asia, Australia was able to rely on trade complementarities in two sectors – natural resources and education – to provide a foundation for broader economic ties. But India does not have the same demand for resources, and COVID-19 has dented educational links. Australia therefore needs to develop economic strategies that are sector agnostic and tailored to engage with post-pandemic India.
To do this Australia need not reinvent the wheel. The strategies of peer countries which have the kind of economic relationship with India that Australia desires provide a useful template. An analysis of the Japanese, German and British approach reveals the importance of investment to economic engagement with India. For these countries foreign direct investment, institutional support for joint ventures, and the strategic deployment of development assistance play a core role in growing bilateral economic relations. Australia can borrow from this successful playbook to recalibrate a new approach to India.
Australia needs to emphasise investment with India to properly unlock the synergies between the two economies. The report identifies three specific strategies for realising this goal: promoting Australia private sector investment into India, the encouragement of joint ventures in global value chains, and the alignment of Australian economic diplomacy to India’s strategic goals. By adopting an investment-driven approach, Australia and India can develop an economic relationship that realises their joint ambitions in the 21st century Indo-Pacific.