Australia: "Red tape" to "red carpet"? India’s election result provides opportunities for Australia

Last Updated: 26 May 2014
Article by Bruce Adkins, Phillip Catania and Arvind Dixit

The election of a pro-business government has the potential to revitalise the relationship between Australia and India.

On Friday 16 May India entered a new era with the landslide election victory of the opposition Bharatiya Janata Party (BJP), led by Narendra Modi, who will become the 14th Prime Minister of India. The BJP unseated the incumbent Congress party which has ruled India for much of the past 67 years since Indian independence.

SCALE OF THE RESULT

The historic significance of the election result stems from the sheer scale of the BJP's victory. The BJP won an absolute majority in parliament (282 out of a possible 543 seats). It has a clear mandate to govern in its own right and will not have to rely on forming a potentially fragmented coalition with minority parties – this has not occurred since 1984.

The size of the victory reflects both the immense voter dissatisfaction with the performance of the incumbent, but also the resonance of Mr Modi's message of economic growth and anti-corruption.

ECONOMIC AGENDA

Mr Modi, who has the backing of India's business community, has promised to revive India's growth rate by attracting foreign investment, reducing red tape, easing archaic labour and land-acquisition laws, boosting employment and investing in the nation's infrastructure.

While he was able to roll out a similar agenda of reform with great success in the economically vibrant state of Gujurat, replicating this on a national level will face challenges, including the fact that essential functions like land acquisition are the realm of the states.

It is expected the government will announce the policy detail for implementing its economic agenda in the coming months. One area of particular focus will be Mr Modi's ability to disentangle over a hundred stranded infrastructure projects and potentially boost infrastructure investment to $10 trillion over three decades.

AUSTRALIA'S OPPORTUNITY

There are several sectors which stand out as priorities for Mr Modi that are likely to provide clear economic opportunities for Australian businesses. These include:

  1. Mining: Reviving stalled growth in the mining sector, which has been crippled by outdated laws, judicial intervention and poor governance, will be a key priority for Mr Modi. If the capacity of the sector is to be increased, it will benefit from foreign skills and know-how, which Australia's mining services sector will be well equipped to provide.
  2. Urban development: Mr Modi has charted ambitious plans for the creation of 100 new cities, some linked by bullet train. Not only will this provide potentially significant demand for Australian resources, but also for advanced urban amenity technology solutions in areas that Australia has world leading expertise, such as water treatment and irrigation, sustainable energy and waste management.
  3. Education: The success of Mr Modi's economic agenda is dependent on India taking steps to realise its "demographic dividend" (i.e. by providing vocation for its burgeoning young population). Attempts at reforming the education sector by the previous government were stalled. India reportedly requires 500 million skilled workers in the next 8 years, and yet currently it only has capacity to train 10 to 20 million per year. Mr Modi will be acutely aware of this discrepancy and his education agenda is likely to focus on increasing the employability of India's youth, both in terms of higher education as well as vocational training. Australian education providers are likely to be provided with tangible opportunities as a result the anticipated reforms.

Although discussion of foreign policy was not prominent during the election campaign (the focus being largely on domestic issues), a change in government could provide the impetus needed to re-invigorate the bilateral relationship between India and Australia.

Despite the shared historical linkages and cultural commonality between Australia and India, trade and investment ties between the countries remains comparatively low. Given Mr Modi's stated desires, there should not be any significant obstacles to hinder the long term growth of the relationship between the two countries.

Refocussing attention on concluding the Comprehensive Economic Cooperation Agreement between Australia and India (which has been in negotiations since 2011) should be a key priority for Australia once the new government has settled. This agreement is aimed at addressing tariff barriers and behind the border restrictions on trade in goods and services.

It should also be a priority to seek a bilateral visit by Mr Modi to Australia, and to engage Mr Modi on regional issues with which Australia and India have significant convergent interests (including conversing with a strengthened Japan, and maintaining close ties with Indonesia). Indeed the G20 summit in Brisbane is fortuitously timed, and provides Mr Modi with the opportunity to visit Australia early in his tenure.

Whether Mr Modi is able to implement his agenda of pro-business economic reform will be watched with great interest the world over. Now is the time for Australia to work towards positioning itself at the centre of India's focus both from a government and business perspective.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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