Julie Bishop - Member for Curtin

Charting the future of Australia-India relations

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Written by Julie Bishop

Published on Tuesday, 06 March 2012 05:13

Published in Australian Polity - Volume 2 (Number 3)

For decades Australian foreign policy has focussed on relations in the Asia Pacific, notably the East Asian economic giants of Japan and South Korea and more recently China, and the other members of the Association of South East Asian Nations.

Australia’s closest ally, the United States of America, has been a dominant economic and military force in the Asia Pacific since the Second World War, and the Asia Pacific region will continue to be a key focus of our trade, strategic and diplomatic efforts.

However, Australia is also a nation of the Indian Ocean, with our western coastline bordering the south eastern edge of the Indian Ocean Rim.

Economic, political, religious and cultural diversity is a feature of the Indian Ocean Rim.

A number of Indian Ocean nations are among the fastest growing economies in the world and five are members of the G20. Others are among the poorest nations on earth, with some deemed to be “failed” states.

The Australian Strategic Policy Institute described the Indian Ocean as Australia’s “ocean of neglect” that is “rediscovered” every fifteen years or so.

India is emerging as a growing mega-democracy and has the potential to be a valuable strategic partner for Australia, and a policy linchpin in our relations with the region.

However, Australia is yet to fully come to terms with India’s regional and global significance and why a deeper and stronger relationship is in Australia’s national interest.

As global and economic power shifts from North America and Europe back to Asia, it is important that Australia develop a comprehensive partnership with India that broadens, deepens and diversifies all areas of our engagement.

Relations between Australia and India have been mixed over the years. Prime Minister Menzies and Prime Minister Nehru clashed over fundamental differences of opinion during the early years of Indian independence.

Since the 1950s there have been three visits to India by Australian Prime Ministers for every one visit by an Indian Prime Minister. Indeed it is nearly 25 years since an Indian Prime Minister, Rajiv Ghandi, was welcomed to our shores.

For decades, we have relied upon our shared broad common values including a tradition of parliamentary democracy, membership of the Commonwealth and a passion for cricket as the basis of our bilateral relations.

Prime Minister John Howard refocused our efforts with India and visited twice during his tenure, taking bold steps to inject a renewed sense of purpose into the strategic relationship.

This included agreeing to sell Australian uranium to India for its civilian nuclear power needs, subject to appropriate safeguards, and entering into a security arrangement, the Quadrilateral Initiative, with India, the United States and Japan.

Regrettably, the bilateral relationship has suffered in recent years in the hands of a Labor Government and Prime Minster instinctively disinterested in Australia’s foreign affairs.

The Government’s announcement of its withdrawal from the Quadrilateral Initiative, made in the presence of the Chinese Foreign Minister, was an unforgivable snub to India and the other parties.

The introduction of a ban on uranium sales to India, overturning the Howard Government’s decision, was a source of unnecessary and considerable tension over the following four years.

The Prime Minister, in taking the ban to the recent Labor  National Conference for reconsideration, is simply a case of too little, too late in terms of a thawing of relations.

The relationship was further strained over the attacks on Indian students studying in Melbourne, and the resulting media coverage caused serious damage to Australia’s standing in India.

According to the Anholt-GfK Roper Nations Brands Index in 2010, Australia’s reputation in India as a welcoming country fell dramatically from fifth place in 2008 to 49th in 2010.

While expectations about India’s economy are yet to be fully realised, India’s economic rise is directly linked to its decisions taken in the early 1990s.

Sweeping economic reforms were undertaken, after decades of under performance when growth was limited to approximately three per cent on average each year.

The Government’s success in floating the rupee, dismantling trade and investment barriers and encouraging foreign investment, paying down India’s external debt, and abolishing layers of bureaucratic and regulatory inefficiencies unleashed a wave of economic dynamism.

India’s economy as a result grew on average by more than six per cent per annum. As noted by Michael Wesley in his recent publication There Goes the Neighbourhood, India’s economy quadrupled in size between 1991 and 2008.

The benefits of these reforms for the Indian people included greater employment opportunities and improved development outcomes. For the hundreds of millions of people surviving on subsistence, India’s economic development provided an escape from the cycle of poverty and hopelessness that characterised previous generations.

India’s continual high levels of economic growth have transformed its relationship with the outside world. Its rising middle class, already estimated at more than two-hundred million, has become a focal point for a global economy weighed down by sovereign debt and investor unease.

Remarkably, this represents only a small part of the potential of the Indian economic miracle.

According to an Organisation for Economic Cooperation and Development working paper, “India could witness a dramatic expansion of its middle class, from 5-10 per cent of its population today to 90 per cent in 30 years. With a population of 1.6 billion fore cast for 2039, India could add well over 1 billion people to its middle class ranks by 2039.”

Such a transformation will reshape the way the world operates and presents massive market potential for Australian exporters.

However, for all the extraordinary economic strides India has made since opening up its economy, great challenges still remain.

The most immediate is extending India’s development gains to the hundreds of millions of people who remain in poverty. According to the World Bank, over forty per cent of India’s population still lives below the international poverty line of US$1.25 per day.

There are promising signs however. The United Nations for example, has estimated that India’s poverty rate in 2015 will be approximately half that which existed in 1990.

Poor infrastructure, inflation particularly rising food and fuel prices, and corruption are other areas of significant concern for Indian authorities.

The public outcry over recent high-profile corruption scandals, such as the “2G telecom spectrum scam” which cost the Indian Government an estimated US$40 billion in lost revenue, has forced the anti-corruption fight onto the national agenda.

This push gained further momentum following a well publicised hunger strike by political activist Anna Hazare. For Hazare and his followers, the anti-corruption fight is India’s second war of independence.

Providing adequate levels of infrastructure and services to India’s rapidly urbanising population presents a massive challenge.

The urban population of India has doubled in the last thirty years, giving rise to three of the world’s 21 mega-cities in Mumbai, Delhi and Kolkata.

According to Future Directions International, the rate of urbanisation in India is likely to increase further as environmental concerns, including the depletion of water aquifers, force rural communities off their land. A World Bank study found that on current consumption trends “demand for water in India will exceed all sources of supply by 2020.”

It is time Australia fully grasped the opportunities that India’s growth presents.

In 2010-11, India stood as Australia’s fifth largest trading partner with two-way merchandise trade valued at more than $17 billion, with Australia exporting more to India than to the United States.

As with China, Australia’s growing economic ties with India are heavily based on the export of mineral resources and energy, particularly coal, gold, copper ores and gas.

In terms of services, Australian education remains the backbone of our engagement, with education-related travel to Australia of over $2 billion.

According to the Department of Foreign Affairs and Trade, “enrolments of Indian students in Australia have increased at an average annual rate of around 41 per cent since 2002.”

In 2009, over 120,000 Indian students were studying in Australia, and we need to continue to work hard to overcome the lingering negativity from the student attacks.

India’s economic re-emergence has also strengthened Australia’s tourism industry at a time when the sector is under renewed pressure and feeling the costs of a rising dollar, increased tourism taxes and the abolition of tourism infrastructure programs.

In 2010, India’s tourism market contributed $800 million to the Australian economy, up twelve per cent on the previous year.

In terms of total inbound economic value, Indian tourism has grown by almost 15 per cent on average each year since 2001, making its Australia’s second fastest growing market.

It is expected to climb from our ninth most valuable market in 2010, to our fifth most valuable in 2020.

The task confronting Australia is to extend the benefits of India’s rise to other areas of our economy.

The Coalition supports the development of an Australia—India Comprehensive Economic Cooperation Agreement as the best way to achieve this outcome.

According to independent modelling undertaken as part of the feasibility study, a free trade agreement between our two countries could increase Australia’s gross domestic product by up to US$32 billion.

Australia is well positioned to play an important role in addressing India’s growing energy requirements.

According to India’s Ministry of Power, “India needs, at the very least, to increase its primary energy supply by three to four times and its electrical generation capacity by about six times” if it is to maintain strong levels of economic growth into the foreseeable future.

India currently relies on coal for eighty per cent of its electricity generation needs and is the world’s third largest coal burning nation.

It is already the world’s fourth largest consumer of energy, even though 25 per cent of its population approaching 1.2 billion currently does not have access to electricity.

The World Nuclear Association reports that India plans to expand its nuclear power capacity from under five per cent to at least 25 per cent of its total requirements by 2050.

This will allow India to rapidly increase electricity generation while reducing its reliance on coal, with the associated benefits of reducing its contribution to global greenhouse gas emissions.

That is why Labor’s ban on uranium sales to India was not only ideological but hypocritical.

The existence of the ban damaged more than the trading relationship and the mutual trust between our countries. In a joint research paper, the Lowy Institute in Australia, the Observer Research Foundation in India and the Heritage Foundation in the United States identified Labor’s ban on uranium sales as a key impediment to a closer security relationship between Australia and India.

The United States recent announcement that it intends to refocus its efforts in the Asia Pacific and to increase its strategic alliances in the region has implications for both China and India.

As Australia’s alliance with the United States continues to deepen, there is a need for Australia to increase its engagement with not only China but also India.

In a paper by India’s National Maritime Foundation it was argued that as Australia and India are “natural maritime partners” there should be an increased level of naval cooperation.

The sea lanes of and around the India Ocean are vital to link the world’s main economic centres.

To the north west of the Indian Ocean are the waters adjoining the Persian Gulf and arguably one of the world’s most important waterways, the Straits of Hormuz, through which pass almost forty per cent of the world’s crude oil and refined petroleum products.

According to Robert Kaplan, the influential US strategist, the Indian Ocean region will be the strategic flash point in coming decades as countries seek to secure their energy supply chains.

With more than thirty per cent of Australia’s exports leaving from Western Australia, the security of sea lanes to our north and west are of critical concern.

Improving Australia’s strategic relationship with India also requires that we strengthen the people to people links.

Student exchange remains a key component in strengthening bilateral relations.

The Coalition has a proud history in this area, having established the Colombo Plan in 1951 under the leadership of Sir Robert Menzies.

Through this initiative, the Menzies Government reached out to our region, drawing in the best and the brightest students to universities in Australia.

The Colombo Plan built a legacy of enduring friendships and understanding between peoples and countries in our region.

For students who went on to hold leadership positions in their home country, their understanding of Australia’s political processes, our values and our interests has proven to be invaluable.

A new scheme that captures the ideals and spirit of the Menzies era is again needed, but whereas Menzies brought students here, we should plan to send our students overseas to study in our region.

Increasing the number of two-way student exchanges between Australia and the region, including India, will not only help promote greater understanding and awareness, but also open up a new generation of networks that Australia can draw upon in the future.

A Coalition government will work to open up new opportunities for two way exchange to encourage more Australia students to study overseas, for doing so is in our national interest and a core part of our “soft diplomacy” in the region.

The economic re-emergence of the Indian Ocean /Asia Pacific region has the potential to transform Australia’s immediate neighbourhood into the centre of international power politics.

Should the Coalition win the next election, we will return to office at a crucial time in the Australia-India relationship. Australia and India are natural partners to work together to resolve the issues facing the region, both bilaterally and through shared membership of multilateral institutions including the G20 and the East Asia Summit.

Injecting greater purpose and momentum into the Indian Ocean Rim Association for Regional Cooperation will also help coordinate our efforts to combat issues such as fisheries management, terrorism and extremism, relations with Pakistan, piracy and illegal migration in the region.

The Coalition has already proven to be alert to the importance of a growing strategic relationship with India. Former Prime Minister John Howard understood the importance of India to Australia’s national prosperity and regional security. As Rory Medcalf of the Lowy Institute wrote, John Howard “had an instinctive understanding of India’s importance, and left Australia-India relations in good shape.”

We will build on the efforts of the Howard Government to transform our relationship with India into a comprehensive strategic partnership.

As global economic and strategic power shifts from west to east, a future Coalition Government will work to strengthen Australia’s relationship with India as part of our focus on the Indian Ocean region.

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