China has a long economic relationship with Australia. India has more recently tightened its economic ties, but has plenty of catching up to do – and fast. Along the way, Harcourt predicts the Australian and Indian trade relationship will lose some of the traditional emphasis on “the three Cs – cricket, curry and Commonwealth”. “This is partly because of India’s enormous appetite for commodities and due to its comparative advantage in the export of professional services,” he says.
A strengthening bond
The relationship between Australia and India is certainly significantly better than in the past, says Indian-born Neville Roach, chairman emeritus of the Australia India Business Council and chairman of Tata Consultancy Services advisory board in Australia and New Zealand. Roach has lived in Australia for 50 years and has watched the Aussie-Indian relationship change dramatically. But he sees plenty of room for improvement.
“Clearly, Australia has a somewhat negative attitude towards India and tends to neglect it,” he says. Historically, Roach believes this dates back to India’s decision to remain non-aligned. (In 1961, India was instrumental in creating the Non-Aligned Movement (NAM) of nations, which are not formally aligned with or opposed to any power bloc.)
“Both countries see each other less favourably than they deserve to be seen,” asserts Roach. “Australian business seems to focus unduly on all the risks and problems in India and there’s very little willingness to acknowledge the inevitable and unstoppable liberalisation process and all the benefits that will bring.” In Australia, Roach often hears talk of how restricted the Indian market is for legal, insurance and financial services. However, US and UK companies are doing business in India to the extent that the current rules permit, because they see long-term value, Roach emphasises. Those who actively engage with India today are likely to be very successful there in the future.
Securing energy
Like China, India has its sights on energy security. Roach notes the very enthusiastic attitude towards China investing Down Under and the relatively lukewarm response to Indian approaches. “This might explain why the Chinese often get the better of Indian companies when assets are up for grabs. Also, the Chinese economy is further down the development path and its companies are going about investment in a very deliberate and aggressive way,” he says. This has put them in a stronger bargaining position. But Roach is seeing changes there too as Indian companies become more determined and more willing to compete aggressively in the bid process, and consequently enjoy greater success.
An obvious example is India’s foray into the hottest of all sectors through its investment in Queensland’s huge Galilee Basin coal reserve, Australia’s largest untapped coal resource. As the world’s second-biggest coal exporter, Australia now ships about 140 million tonnes of thermal coal overseas a year, and by the end of the decade Galilee could be exporting 195 million tonnes of thermal coal annually.
India’s increasing involvement in coal-related mergers and acquisitions in Australia has culminated in the subcontinent’s largest coal importer, Adani Group, spending about A$5 billion to buy up reserves in Galilee from Linc Energy, as well as Queensland’s Abbot Point coal terminal. GVK, one of India’s largest power and infrastructure groups, has bought major shares in Australian coal mines in Galilee from Hancock Prospecting – controlled by the world’s richest woman, Australian Gina Rinehart – for about US$2.4 billion. The company, which has formed a joint venture with Rinehart’s Hancock Coal, plans to spend at least US$10 billion more to develop the mines, dig out the coal, build rail facilities and expand the ports.
