Australia India Business Council Annual Australia India Address

Acknowledgements

Thank you for that welcome. Ladies and gentleman thank you, it is a delight to be here with you this evening. Can I commence by firstly acknowledging the traditional owners on whose land we meet. I understand that you have had a wonderful cross-cultural experience of digeridoo taking in traditional Indian music and I think it’s a wonderful recognition of the diversity and blending of Australia’s ancient culture of our indigenous peoples mixing with newer cultures to Australia but equally ancient cultures from across the globe.

Thank you Sunil [Gupta, Vice-President AIBC ACT and MC].

Your Excellency Mr Anumula Gitesh Sarma [High Commissioner]

To other distinguished guests and all it’s a pleasure to be here tonight to deliver the 2019 AIBC Annual Australia India Address.

The AIBC has been working to deepen the Australia-India relationship for more than 30 years — and it is important now more than ever that we build on recent momentum and goodwill and translate that onto the scoreboard … if you will forgive the cricketing analogy that is one of many enduring links between our countries.

Introduction

When you think about the change that has occurred since the AIBC opened its doors in 1986 — both the change in our trading relationship and the change in India itself — it’s evident just how far we’ve come.

In 1986, India was still a heavily state-driven, highly-protected economy^[1] with, in some quarters, a distinct distrust of the private sector.

Australia, too, still had a lot of work to do, as we were still unpicking the legacies of the earlier decades of protectionism in our own history. The much needed macro-economic and micro-economic reform of the 1980s and 1990s opened up the Australian economy and helped to underpin almost three decades of uninterrupted economic growth that we continue to enjoy today.

Back then, total goods trade between Australia and India was just $628 million (in 1986-87), putting Australia’s trade with India at less than 1 per cent of our global merchandise trade [0.9 per cent^[2].

With the Indian debt crisis of 1991, government debt peaking at $70 billion and foreign exchange levels falling perilously low, then Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh began a bold program of economic reform — devaluing the rupee, stripping away import quotas, reducing tariffs, opening up to foreign investment, and so on.

Finance Minister Singh went on to lead India, and as we all know he would be followed by another reformer in Prime Minister Narendra Modi.

On the back of the 1991 reforms, India’s growth blossomed, and whole new industries opened up to the world, particularly in services, with the IT industry widely recognised as the “poster boy” of the reforms.

Today, India accounts for 2.4 per cent of total world trade^[3].

Now, our merchandise trade with India is worth more than $21 billion a year — and India’s share of Australia’s total trade has grown from less than 1 per cent to 3.1 per cent.^[4]

India’s opening to the world and domestic economic reforms have delivered real benefits to its people, and to the people of its friends and partners like Australia.

As the World Bank has made clear^[5], with the post-1991 reforms came higher growth rates, more consistent and more stable growth, the average citizen is better educated — and perhaps the best measure of all: through healthcare, Indians are living longer.

An average annual growth rate of 7.5 per cent across the last twenty years has raised India’s per-capita GDP and significantly reduced the proportion of the population living below the poverty line.

The huge potential in the bilateral relationship

As I think about this relationship in 2019, what strikes me most of all is the extent to which we’ve already made great strides, but also that this is a bilateral relationship of still so much untapped potential.

That idea, that realisation, was of course behind our Government’s decision to commission former DFAT head Peter Varghese to undertake the India Economic Strategy, which I know the AIBC strongly endorses.

As India continues to reform its huge, sprawling and complex economy, Australia is here as a key partner, a country that wants to do so much more, and shares so many values, with India.

Consider the ambitions we’ve both laid out.

Prime Minister Modi has committed to an aggressive growth target of India becoming a US$5 trillion economy by 2024-25.

Much of that growth will need to be investment-led, meaning significant input of foreign capital into India will be essential.

India has already - since 2014 - implemented a number of reforms to make inwards investment more attractive. Those reforms have included:

• permitting 100 per cent FDI with automatic approval in the majority of sectors;
• implementing the asset recycling scheme; and
• corporate governance reforms, particularly in insolvency and bankruptcy codes.

Back in 2013, there were four deals attracting high levels of Japanese and Chinese investment into India.

By 2018, there were 61.

Back in 2013, there were 96 deals with high levels of US investment — in 2018, there were 222.

Australia’s India Economic Strategy sets out an ambitious target to be part of that significant opening up, calling for A$100 billion of total Australian investment in India by 2035.

In the 12 months since the launch of the India Economic Strategy, we’ve made good progress on the 43 measures the Morrison Government has supported.

We’ve begun expanding our diplomatic presence in India, with the commencement of operations at the Australian Consulate-General in Kolkata in March — a strategic investment on our part to access opportunities in India’s resource-rich eastern states and emerging north-east.

We’ve expanded the Australia-India Mining Partnership with the Indian Institute of Technology at the Indian School of Mines in Jharkhand.

We’ve signed an MOU between Austrade and Invest India to support Australian companies to enter the Indian market and promote bilateral investment flows.

We’ve established an Australian State Education Forum on India, which met first in August.

We’ve appointed a second Australian Agriculture Counsellor in our High Commission in New Delhi in March to foster deeper institutional ties and strengthen advocacy of Australian agricultural trade to India.

And we’re establishing an Australia-India Food Partnership, opening up new opportunities for our universities, research institutions and agri-tech and service companies.

I was pleased to recently chair a meeting of the Ministerial Champions for the India Economic Strategy in September, bringing together the four lead sectors of education, agribusiness, resources and tourism together with my colleague and friend the Foreign Minister, my Assistant Trade Minister Mark Coulton and the co-chair of the Parliamentary Friends of India, our Hindi speaking Julian Leeser.

We’ve significantly increased the pace of our mutual visits and meetings.

Our Prime Minister met Prime Minister Modi at the East Asia Summit where I was pleased to accompany him earlier this month following their meeting at the G20 in June, Resources Minister Matt Canavan visited India in August, Education Minister Dan Tehan was in India with a delegation from the education sector just last week and the Foreign Minister met her counterpart on the weekend.

The Prime Minister will visit India in January, accompanied by a business delegation led by the chair of the Australia-India Council Board, Ashok Jacob. During that visit, we hope that India will be in a position to launch formally its own Australian Economic Strategy, led by Ambassador Anil Wadhwa.

I have already met Commerce Minister Goyal four times since his appointment in May this year and already he feels like an old friend.

I look forward to leading a business delegation to India in late February, focussing on small and medium enterprises across our priority sectors. We’re expecting something in the order of 100 or 120 companies to take part, and that business mission, which will visit five Indian cities, will be part of an innovative Australia-India Business Exchange, which Austrade is coordinating.

Dubbed AIB-X, the Australia-India Business Exchange will be taking place over several months. Starting in February 2020 it will focus on the priority sectors of education, tourism, energy and resources, and food and agribusiness.

We’re trying to radically lift our business community’s India literacy, by helping them to see why India is such a great opportunity for investment and trade.

Some of you will recall how successful our Australia Business Week in India was in 2017 — AIB-X is intended to build on that, helping Australian businesses make vital contacts in India, to drive new ventures.

In 2018 Australian investment in India was $15.6 billion. There is much to do to get it to $100 billion by 2035 but we are confident with the depth and engagement of activity that this is achievable.

Let’s not forget that Australia has the 6th largest pool of investment funds under management of any country in the world — but while Australia has the investment capital, India needs to provide the right environment to attract that on commercial basis.

Prime Minister Modi is already putting in place many of the measures to draw in the investment capital.

In his first term, the Government prioritised banking sector reform, and improved the cost and availability of credit.

It has outlined an impressive privatisation agenda.

It has further loosened Foreign Direct Investment settings, including by opening up commercial coal mining and contract manufacturing to 100 per cent FDI through the automatic route, and by relaxing local sourcing requirements for single-brand retail.

Crucially, it has cut corporate tax rates to 22 per cent for existing companies, and even lower — at 15 per cent — for companies commencing manufacturing activity.

These are important steps.

Building sound regulatory settings which support, for example, the timely enforcement of contracts, the repatriation of profits, and FTA or investment treaty provisions, are essential to building more confidence for investors that their funds will be secure and they can promise and deliver investors the returns they’re expected.

I’m glad to say there are already examples of new investment flowing in.

In August, our largest superannuation fund, AustralianSuper, signed an agreement with India’s National Investment and Infrastructure Fund to invest US$250 million in its Master Fund, along with co-investment rights to build up to US$750 million of transport, energy and urban infrastructure.

Likewise, Macquarie Infrastructure and Real Assets won a bid to invest over $2 billion to manage almost 700km of India’s national highways over the next 30 years.

Energy is one of the ten key sectors outlined in the India Economic Strategy.

India’s demand for energy is set to outpace domestic supply in the years ahead — as it takes on the mantle of requiring the largest contribution to global energy demand growth worldwide out to 2035.

Australia is already a reliable supplier of India’s energy needs, and stands ready to work on new projects.

Since 2010, coal has been Australia’s largest single export commodity to India, primarily in metallurgical coal used for steel production. Adani’s investment in Australia will further strengthen these linkages.

For India to continue its momentum of rapid growth, it will need to unlock new and important markets in the coming years.

As outlined in the India Economic Strategy, technology has the potential to dramatically change India’s flow of capital.

By 2025, digital finance is forecast to boost India’s GDP by $950 billion and create 21 million new jobs.^[6]

Australia is eager to be an engaged partner for India on the road to technological development and innovation.

Swinburne University of Technology and the Indian Institute of Technology-Hyderabad (IIT-H) signed an agreement for joint PhDs, which will deepen research in priority areas which include smart cities, health innovation and digital innovation.

This research will prove to be of benefit to both our nations and ensure we are securing the opportunities in a world of rapidly evolving technology.

Closer relations: tourism, aviation and education

Australia is keen to develop our personal links even closer than they are today.

The Indian diaspora already makes such an amazing contribution to Australia’s social and economic fabric — but we want to bring our people closer still.

In tourism, India continues to be one of Australia’s fastest-growing inbound markets.

In the past five years, we’ve recorded an average over five years of double-digit growth in Indian tourist arrivals and expenditure.

According to the Australian Bureau of Statistics, 386,400 Indians came to our shores in the 12 months ending September 2019, and slightly more — 418,600 — Australians went the other way.

Indian visitor numbers have grown 53 per cent in the past three years, and spending by Indian tourists in Australia has risen 68 per cent to $1.8 billion which is of huge benefit to our economy and something we obviously want to continue to grow, not just for those economic benefits but for the enhanced cultural people-to-people and businesses links that they fill.

The T20 Cricket World Cups in Australia in 2020 provides an exciting opportunity to raise Australia’s profile as a quality tourism destination.

Our new campaign promoting the World Cups (women’s: 21 Feb-8 March, men’s: 18 Oct-15 Nov) — featuring adored Indian cricket commentator and Friend of Australia Harsha Bhogle, entertainment stars and crickets — will run across television, digital and social media channels.

And critically when our Prime Minister tweeted the advert from the campaign he then had Prime Minister Modi retweet our advert for our tourism campaign to come here during the T20 and of course that’s hitting many millions and very much was a generous and warm gesture by PM Modi that we welcomed.

In aviation access, we’ve made great progress in the last few years, but there is still more work to be done.

India and Australia have an open skies agreement which presents huge future opportunities for tourism sectors, and airlines and airports in both countries.

In 2018, the Indian and Australian Governments agreed new liberalised arrangements under the Air Services Agreement to enable Australian and Indian airlines to operate unlimited services to six airports in Australia and India respectively.

The next step is growing direct aviation access. Currently, Air India is the only direct flight provider, with eight flights to New Delhi per week. That means 90 per cent of Indian visitors fly to Australia via South-East Asia.

This demonstrates there is huge room for improvement, particularly in terms of greater direct services. The open skies and air services agreements mean there is plenty of capacity to increase direct flights - particularly at some of our smaller gateway points like Adelaide and Perth — to strengthen our tourism industry, boost our economy and create more jobs.

And then, of course, there is education.

Under the India Economic Strategy, education is a ‘flagship’ sector for the bilateral relationship.

This is not only because of our extensive and broad-ranging engagement, but because education and skills training weaves its way through every sector of our economies.

Education builds connections and functions as a bridge between our two communities.

It enhances India’s skill base to achieve its ambitions for economic growth and modernisation.

India is one of the most popular destinations for Australian New Colombo Plan students, and indeed we are delighted to see India now as our second-largest source country for international students to Australia.

We continue to encourage students to undertake that two-way engagement and mobility that strengthens our ties and boosts our skills for the future.

Challenges in the relationship

All that said, we know that there will always be challenges in the Australia-India relationship, like in any significant international partnership.

Agriculture, being honest, is an important example.

Australia can play an important role in India’s food security.

Supply and price volatility will continue to be a feature of India’s food market for some time to come.

Australia can continue to meet supply gaps in the Indian agricultural market, including for premium products.

But our Government is concerned about the impact of India’s agricultural trade settings on Australia’s agricultural sector and on global markets.

India’s trade restrictive agriculture policies have hit Australian industry hard, including on producers of grains and pulses, who face, for example, a 60 per cent tariff on chickpeas, and a 30 per cent tariff on lentils.

To put figures on that, consider this:

Australian exports of pulses to India have decreased from $1.4 billion in 2017 to $31 million last year — ie. nearly 98 per cent reduction in trade in that category.

The Government is also deeply concerned with India’s sugar subsidies, that are vastly in excess of its limits under WTO rules.

They have contributed to a decrease in the global price of sugar which is hurting our Australian producers and those elsewhere.

Australia will continue to press India to remove subsidies ahead of the outcome of the WTO dispute on sugar. We do this though understanding the difficulty India faces with the vast number of small farmers who lack the scale required for optimal productivity. Nevertheless, reform in these areas is important — for continued progress and modernisation in India, as well as for our Australian industry.

As a result, we continue to urge the Indian Government to reform its agricultural policies across all sectors to be more sustainable and consistent with its WTO obligations.

We know that change will take time, but Australia continues to engage Indian agencies and officials and leaders on the benefits of market approaches to agriculture.

Over the past few weeks, I know a lot of people have been talking about India’s decision to hold off from deciding to join the Regional Comprehensive Economic Partnership, which the other 15 negotiating parties have committed to sign in 2020.

I want to make it very clear that Australia respects India’s decision, taken based on its assessment of its own national interest, but of course the agreement of this huge regional trade pact would be much better with India in and our door remains wide open to India if and when it is ready.

RCEP would integrate India’s economy more closely with that of the fastest growing region in the world, across the Indo-Pacific, in East Asia and Southeast Asia.

It would give India a chance to help shape Indo-Pacific trade architecture, rules and standards in ways that will support India’s growth in the years ahead.

Under RCEP, Indian businesses would be better integrated into regional supply chains.

It would help in achieving the US$5 trillion economy target too but I appreciate that these decisions are not easy.

As I said earlier, both our nations have tackled difficult reforms over recent decades. In both our cases these reforms, while unpopular at the time, delivered increased growth and prosperity to our peoples.

Whatever the final outcome on India’s participation in RCEP, Australia remains firmly committed to deepening ties with India by whatever means possible. We will continue to use the India Economic Strategy as our platform for engagement and growth across our economies.

And across areas of mutual strategic, maritime and rules setting interests across the multilateral system, it will be important we continue to work together to ensure stability and security in the Indo-Pacific region.

Conclusion

Friends, we have come a long way in the Australia-India relationship since the AIBC opened its doors a three decades ago.

But we need to see and seize the potential that still lies ahead.

Australia and India have many shared values, family, cultural, business and sporting links but we also have a similar outlook on the world around us. We must not be blind to the challenges ahead in reaching the ambitions we share for our economic relationship; but we also must be bold in realising those ambitions.

I hope you all enjoy dinner tonight and can go from here to, as I am confident you are, being the champions to drive our economic relationship to the next level, go beyond the promises and the potential to the delivery.

Be confident our Government is committed to the delivery of all this relationship has to offer and we will be your firm partners in supporting you through that journey.

Thanks so much for the chance to speak to your tonight.