Such an exercise with Australia would unleash huge benefits. India should, however, liberalise services trade.
When Prime Minister Narendra Modi visits China next month he is expected to stop in the historic city of Xi’an. Xi’an is the hometown of China’s President Xi Jinping, but it’s also a city inspired by Bengaluru. Leaders in Xi’an want their city to develop, like Bengaluru, into a global IT powerhouse. Indeed, India has five of the world’s top ten IT cities: Bengaluru, Pune, Hyderabad, Chennai and Gurgaon.
It’s easy to see why China is eager to learn from India’s success in developing a competitive and export-oriented services industry.
The example is also a reminder of why services will be at the centre of India’s rise as a global economic power. India will need to lift its agricultural productivity, build energy and transport infrastructure, and persuade companies to ‘Make in India’. But services will play an equally important role — as a critical input to other sectors and as a major export in their own right.
India already enjoys a strong reputation. It is a global leader in delivering quality services at a low cost — demonstrated by the extraordinary uptake of mobile phones and banking services by rural Indians. I suspect it will be through the innovation of companies like Reliance Jio that the world’s poorest will first be connected to the internet.
Indian IT services have transformed operations across a wide range of industries globally. This era of transformation has a way to go. The past year has seen significant investment by leading global companies — including Australian companies — in business and research partnerships with India’s IT majors and emerging players. The services sector is all about the human factor. Here, too, India is well placed. You don’t need to spend long in India to see the flair and creativity that Indian service providers are bringing to the market — be it in tourism, health or retail.
India’s human capital is also driving services innovation globally — whether it’s the IIT graduates who play such an oversized role in Silicon Valley, or the Indian-born CEOs of the world’s leading companies and universities.
All of this suggests that India’s services sector stands to benefit enormously from trade and investment liberalisation.
As a trusted strategic partner of India’s, Australia can play an important role. I am visiting India this week on my third visit in seven months. My focus is driving the conclusion of a Comprehensive Economic Cooperation Agreement (CECA) — or FTA — between Australia and India by the end of 2015, as directed by prime ministers Narendra Modi and Tony Abbott.
But I am also pleased to be participating, alongside Prime Minister Modi, in the Global Exhibition on Services. I am determined to ensure that services — and the investment that propels services trade — are given prominence, alongside goods, in the Australia-India CECA. That was certainly the case for the cutting edge FTAs that Australia concluded in 2014 with Korea, Japan and China.
For Australia, like India, is something of a services superpower. Australia is renowned for its mining and agriculture sectors — which are indeed among the best in the world — so it’s perhaps a secret that our biggest export is services, which account for over 40 per cent of our valued-added export earnings.
Moreover, as a new study by the ANZ Banking Group, PwC Australia and Asialink points out, services industries add significant value to Australia’s traditional exports — nearly 20 per cent of the value of mining exports according to recent OECD data. The services sector employs 9 out of 10 Australians and accounts for three-quarters of our GDP, three of our five ‘globally significant’ industries (education, tourism and financial services), and half of our top 20 companies.
We see tremendous synergies between dynamic sectors in Australia and India — be it health and aged care, education and skills, IT and communications, legal and accounting services, financial services, insurance, and architecture.
A mutually beneficial CECA, complemented by action to reduce trade barriers at the WTO and through regional mega-deals such as RCEP, will be critical in helping India compete in an increasingly integrated global services environment.
Increased trade and investment will also help ensure that Indians are well represented among the 3.2 billion strong Asian middle class that will have emerged by 2030.
Australian services providers are excited by the opportunities afforded by India, the world’s fastest growing major economy.
But Indian providers should also turn their attention to Australia, the world’s 12th largest economy and one that has enjoyed a quarter century of uninterrupted economic growth and that sits on India’s southern doorstep. Importantly, the Australia-India CECA is not just about services trade. It’s about the two-way transfer of investment, technology and expertise — and here the potential benefits for India are immense. And not only in areas where India would expect to gain from Australian know how, such as health and education.
Some of the most exciting opportunities are in agriculture: Australian dairy cows are five times more productive than Indian cows, a gap that can be narrowed — to the great benefit of India’s farmers — by investment and technology transfer.
Services trade depends, critically, on human mobility. Here there are strong foundations on which to build. India is now the largest source of skilled migrants to Australia (over-taking China in 2012) and the second largest source of international students.
Australians are among the highest users of India’s new electronic visas. The CECA will allow us to further lower the barriers to travel, migration and professional exchange.
You only have to look at one of the world’s most successful services industries — the Indian Premier League — to see the power of services trade between Australia and India! Underpinning much of India’s services growth will, we hope, be the country’s success in attaining energy security. As a reliable long-term supplier of coal, gas, uranium and renewable technology to India in coming decades — as well as a source of mining investment and expertise — Australia is keen to assist India in achieving the energy security that will help unleash the potential of India’s hundreds of millions of services entrepreneurs.
Under Prime Minister Modi’s strong leadership, Australia sees India as being on the path to challenge our mutual friend and partner, the United States, for the title of the world’s leading English-speaking country.
If Prime Minister Modi visits Xi’an next month for discussions on how India can help China create a ‘new Bengaluru’, he will be travelling to the starting point of the original Silk Road.
There could be no better illustration of India’s potential to be at the centre of a new ‘Services Silk Road’ to drive growth in the world’s most economically dynamic region.
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