“Indian companies have learned how to invest internationally without rocking the boat,” he says. “They’re private companies – not state-owned enterprises – and they’re more diversified with a tendency to move in a streamlined and unobtrusive fashion. Plus, they’re buying infrastructure not a key stake in a marquee company, such as Rio Tinto.”
Common traditions
Lip service is always paid to the common traditions Australia shares with India, but Australia’s main interest is China, argues Gautam Bose, associate professor in economics at the Australian School of Business. While he believes Chinese companies do not have a different or unique investment style as such, China has greater foreign currency reserves available for its corporates and companies to tap. Arguably, China is seen to present a unified front whereas Indian companies are perceived as a bunch of disparate entities.
As in any capitalist country, Indian companies are independent and when they invest offshore they do so without government support. “Whether an Indian company succeeds or fails in Australia is determined by the same forces as whether a South African, UK or US company succeeds or fails. It’s just one more company doing a deal,” Bose says.
“Even if the Indian government had foreign reserves, these would not naturally become available to Indian companies since they are private entities.”
Indian companies do not have a national stamp on them. By contrast, Bose says, Chinese state-owned enterprises (SOEs) have government machinery behind them, which means they can often be caught up in the politics and the Sino-Australian diplomatic relationship. “Thus, their investment strategies become that much more visible, and are perceived as part of a broader Chinese strategy.”
Inevitably comparisons are made between India and China because of the relative economic success of China over the past 20 years, notes Harcourt who calls India “the quiet achiever”.
“If you look at India’s development, and the policy stances of the two nations, they’re very different. In 1980, China and India were about level pegging when it came to GDP and per capita income. By 2000, however, China was about twice India’s size in terms of GDP and per capita income and eight times its size in terms of exports. Since 1979, China has transformed itself from a Maoist, closed-economy to a more market-based, open economy, keen to engage in the world. It relied heavily, though, on inward foreign direct investment.”
By contrast, Harcourt observes that India stuck to a closed economy model with state planning dominating economic policy and import-replacement policies, instead of the export-led development approaches of its East Asian neighbours. Ironically, India’s economic nationalism held it back until 1991 when it opened up its economy under the reforms of then finance minister, now the prime minister, Manmohan Singh.
“Interestingly, it is because India had an anti-colonialist tradition of economic nationalism that many Indian companies that have set up in Australia own strong global brands. They are genuinely international companies compared to China’s generally state-owned enterprises,” Harcourt points out.
