Macroeconomic overview

India and Australia have more in common than what meets the eye. Both are characterized by the presence of free media, have multi-faceted cultural societal structures and an abundance of natural resources. At a fundamental level, both are also liberal democracies that inherited a British colonial past. For many Indians, the perception of Australia has been shaped by cricket. Figures from Australian cricket remain extremely popular in India and for Australians too, India is on the radar predominantly because of cricket.

However, with the collective growth potential that both countries are known to hold, it would be unfair to base the relationship solely on cricket. The strategic partnership between the two countries is undergoing an overhaul and is rapidly changing for the better.

The relationship between the two countries is significantly determined by people-to-people ties between the two countries. The movement of Indians to Australia can be traced back to the 19th and 20th centuries that witnessed movements of Indian settlers from Mauritius, Fiji, South Africa, British Guyana and the Caribbean to Australia.³⁰ A few Indians had also migrated directly from India to Australia due to the facilities set up by the East India Company.

In the later years of the 19th century, the labour demand in sugar plantations further incentivized Indians to migrate to Australia. The first Sikhs arrived in the country somewhere in the late 1830s. The Sikhs came from an agrarian background in India and thus, fulfilled their tasks as farm labourers on cane fields and shepherds on sheep stations well. Until the 1860s, Indians (mostly Sikhs), worked as merchants, industrialists and businessmen in Australia.³¹

From the 1860s onwards, cameleers, commonly called ‘Ghans’ were brought to Australia to help explore and settle Australia’s vast arid interior. While the Ghans consisted mainly of Muslims from Afghanistan and its surrounds, a sizeable minority were Sikhs from Punjab. The Ghans set up camel-breeding stations and rest house outposts, known as caravanserai, throughout inland Australia, creating a permanent link between the coastal cities and the remote cattle and sheep grazing stations until about the 1930s, when they were largely replaced by the automobile.

The Australian Government had supported the independence of India from the British Empire and the admission of India as a Republic to the Commonwealth of Nations. Easing of restrictions in the post-war period contributed to the increase in Indian migrants to Australia.³² The Colombo Plan, a bilateral initiative to enhance social and economic development of member countries in the Asia-Pacific regions and relaxation of restrictions on immigration, were in response to the growing demand for English-educated and technologically skilled workers.³⁰

In the 1980s and 90s, Indian engineers and IT sector experts migrated from India for opportunities in the technology industry in Australia. In recent times, the number of migrants from India has increased from ~90,700 in 2000 to ~592,000 in 2018.³³ Indian migration to Australia has been influenced by the appeal of educational infrastructure available in the country. In 2018, Australia was ranked as the second largest destination for Indian students with 108,292 student enrolments from India during the year.³⁴ Moreover, the number of Indian tourists to Australia has also seen a dramatic upsurge. The new wave of Indian immigrants to Australia is highly educated and well-travelled. There has also been a significant increase in the frequency and level of political dialogue between India and Australia, especially after Prime Minister Narendra Modi’s visit to Australia, in November 2014.

The term ‘Indo-Pacific’ has become popular in Australian political circles, thus making India relevant to Australia’s political and economic strategy. Increased political intervention in the past decade has improved the dynamics between the two countries. The two-way Prime Ministerial visits in 2014-15 provided a significant boost to this relationship. Prime Minister Narendra Modi’s visit to Australia, in 2014, highlighted that Australia was no longer peripheral to India’s interests. In recent years, the dialogue between the two countries in areas of security and defence, trade and investments and greater convergence on issues around the world has resulted in positive prospects for a strong partnership.

Though trade and investment between the two countries has increased in the last few years, bilateral business growth is yet to reach its full potential. Australian businesses have not fully explored the Indian market and perceptions about India are still stereotypical. This has resulted in below par investments into India. Indian businesses in turn have also not viewed Australia with the same zest as the US or Europe, testified by the fact that Australia does not feature in India’s top 10 overseas direct investment destinations and rather surprisingly, is still seen as a small, highly regulated and distant market. These perceptions need to change.

With India’s rapid pace of growth and Australia’s collective strengths in global growth sectors, a concrete collaboration between them will serve to be beneficial to both the countries.

Since 2011, Australia and India have been negotiating a bilateral free trade agreement — termed the Comprehensive Economic Cooperation Agreement (CECA). The two countries have also been part of the Regional Comprehensive Economic Partnership (RCEP) negotiations, which was concluded at the Third RCEP leaders’ summit held at Bangkok on 4th November 2019. India has communicated its intention to not participate in the RCEP in its current form. This development further necessitates a strong bilateral partnership for Australia and India to capture economic opportunities. With the existing federal Governments in both India and Australia now entering the second term, there is a strong reason to believe that this is perhaps the ideal time to conclude some of these discussions with concrete steps detailing the actions that are required by each partner.

³⁰ The story of the Indian diaspora in Australia and New Zealand is 250 years old, 2018, Quartz India
³¹ Indian hawkers; Museum Victoria
³² Menzies on Tour, eScholarship Research Centre, The University of Melbourne
³³ Australian Bureau of Statistics, Austrade, 3412
³⁴ Indian students enrolling in Australia surged 25% in 2018, 2019, Times of India