India and Australia: No longer a “periphery” relationship

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5 December 2014

Reciprocal state visits by the PMs of both countries signals a positive change in the bilateral relationship. What could the change mean for your business?

Last month, Indian Prime Minister Narendra Modi concluded the first Official visit of an Indian PM to Australia in 28 years. Mr Modi was accompanied by a delegation comprising some of India’s senior government representatives and business elite. Mr Modi’s trip followed an official state visit by Prime Minister Tony Abbott to India in September (Mr Abbott was the first foreign leader officially hosted by the newly elected Indian PM).

Transformation of the relationship

In the space of two months, the previously stagnant bilateral relationship between India and Australia has been re-invigorated, and there has been a marked shift in the attitude of the countries towards collaboration in a range of areas.

The potential for growth in the relationship between the two countries across a variety of industries, is immense. The opportunities, including those for Australian service providers to India, are significant.

Mr Modi’s proclamation in his address to the Australian Parliament that “Australia will not be at the periphery of our vision, but at the centre of our thought” and that Mr Modi sees “Australia as a major partner in every area of our economic priority” highlight the significance of Australia’s potential role in India’s development aspirations.

What has contributed to the transformed relationship? 

  • No political barriers: We are in one of the very few periods in recent decades where there are no significant political barriers between the countries. The Australian Government’s decision to sell uranium to India for peaceful purposes (which was formalised by Mr Abbott during his trip to India) essentially removed the last of these barriers. 
  • Converging geopolitical interests: Australia and India share a common interest in maintaining stability and security in the Indo-Pacific region, and both countries recognise the strategic role each has within the region. A broad ranging security co-operation agreement was agreed by the PMs during Mr Modi’s visit.
  • India’s development ambitions: Mr Modi is acutely aware of the enormity of India’s energy shortfall in light of its ambitious development aspirations. The broad mix of energy sources that Australia can offer including coal, LNG and uranium is appealing to Mr Modi in light of his pragmatic views about carbon abatement and energy security.
  • Fresh faces: The history of Australian and Indian relations has been dominated by the influence of individuals and characterised by sustained periods of mutual indifference. The fact that both Mr Modi and Mr Abbott have engaged in bilateral visits early in their tenure is a positive step toward discarding past grievances and capitalising on commonalities and opportunities for partnership.

Economic opportunities 

Last year, bilateral trade stood at $15billion which is a 10th of Australia’s trade with China. There is clearly room for substantial growth.

Mr Abbott’s announcement that he and Mr Modi would ensure a free-trade deal by the end of next year is encouraging. The timeframe is clearly optimistic considering that a trade agreement has already been in negotiations for the last three years with limited progress. However, the newfound political will should assist in concluding a deal quickly (and may break impasses in sensitive areas like agricultural concessions and professional services).

Mr Modi’s “Make in India” campaign highlights his understanding that India needs significant foreign investment for its economic development, and his focus abroad has largely been on attracting and facilitating this.

Both PMs identified “vast potential” in “priority areas” such as resources, education, skills, agriculture, infrastructure, investments, financial services and health. For more on the economic opportunities for Australian businesses, see “Red tape” to “red carpet”? India’s election result provides opportunities for Australia.

In the context of inbound activity into Australia, apprehension held by Indian companies towards Australian investment seems to be abating. Take for example Adani’s planned investment to build Australia’s biggest coalmine in Queensland’s Galilee Basin which now has a substantial line of credit from the Bank of India and an offer of equity from the Queensland government. 

Both leaders referred to the importance of this project in meeting India’s energy requirements, and appear desperate for it to succeed. In the technology space, Indian companies Wipro and Cognizant have recently completed Australian acquisitions, and Infosys is considering taking a stake in the elite research hub NICTA.

Businesses with an interest in Australia and India will have several opportunities in the new year to participate in targeted trade delegations including Australia Business Week in India, and a Make in India event in Australia. These will be complemented by a newly constituted Australia-India CEO Forum.

Realising the full potential of the economic relationship between India and Australia requires considerable and sustained effort from government and businesses on both sides. The bilateral visits have provided much needed impetus – maintaining momentum and focus will be critical to success.

We are travelling to India in the New Year to meet with Indian government representatives and businesses and will be presenting on opportunities in Australia for Indian business. Likewise, we will be discussing how Australian business can build on the platforms created by Mr Modi and Mr Abbott. We will report further, but in the interim, if you have thoughts or questions regarding legal and business issues in the context of the Indian/Australian relationship, please contact Philip Catania, Bruce Adkins or Arvind Dixit.




The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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Contacts

Bruce Adkins

Partner. Brisbane
+ 61 7 3228 9431

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Philip Catania

Partner. Melbourne
+61 3 9672 3333

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Arvind Dixit

Special Counsel. Melbourne
+61 3 9672 3032

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