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Asian Affairs

Australia and India: some way to go yet

AAP/Andrew Meares

Malcolm Turnbull is in the middle of his inaugural visit to India. He appears to have developed a good rapport with India’s prime minister, Narendra Modi. This is a vital development if Australia is to realise its ambition to significantly improve Australia-India relations.

Despite the cliché that India and Australia are bound by the three Cs – cricket, Commonwealth and common law – the two have been estranged longer than they have been friends. They were on opposite sides of the Cold War. And when India made good on its nuclear ambitions in May 1998, Australia’s over-the-top reaction emphasised how far apart the two remained.

The relationship only moved in a really positive direction over the past decade or so, pushed along by strong governmental effort. This was symbolised by the removal of the pebble in the shoe that was the ban on the sale of uranium.

Since then, there has been strong bipartisan commitment to making stronger relations with India a tier-one priority in Australian foreign policy.

There are several reasons for this strong commitment. Most obviously, India represents significant economic potential. It will be the world’s most populous country and largest economy at some point in the next few decades.

India’s economic potential has long been constrained in the past by protectionist policies and an ocean of red tape. Under Modi, the prospects of deregulation and liberalisation promise considerable opportunity for a trade and investment dependent Australia.

Australia and India increasingly share security interests and, as democracies, both have a stake in a liberal and rules-based international order. Australia sees India as a like-minded country with whom it can make common cause in a world increasingly shaped by authoritarian and illiberal regimes.

In the longer run, it is more likely than not that India will become a great power of crucial importance to Asia and world politics more broadly.

These are good reasons for developing a close relationship with India. But much remains to be done before this can occur, particularly given that India matters much more to Australia than the other way around.

While the two countries have inked security agreements during the current visit, there is a tendency to overstate the scale and significance of just what the two can actually do together in the short-to-medium term.

In the longer run, it’s not at all clear that Australia and India share a common view about the kind of international order they prefer. Australia is profoundly invested in the continuation of an Asian order centred around US primacy. In contrast, India would prefer a multipolar future in which it is one of the dominant centres of power – with American power relatively diminished.

But the bigger challenge is that even though government seems to be of one mind on India, there is only so much the state can do to drive the relationship. Durable partnerships between countries derive not just from shared political interests and a common strategic outlook – these must also be reinforced by market forces and societal interests.

It is often overlooked that the alliance relationship between Australia and the US is buttressed by deep economic ties. The US is Australia’s most important source of inward investment, and a top-three trade partner. And the societal and cultural connections are deeply rooted and go back 150 years. Similarly, Australia-Japan relations rest on trade and investment ties, as well as strong people-to-people links.

Economic links to India remain stuck. Merchandise trade has declined by 50% in value since 2010. Australia is ranked 33rd in countries to whom India exports, and India is no longer in Australia’s top-ten two-way trade partners.

Investment is thin and largely one way, from India to Australia. And it is not just protectionism and regulation that is getting in the way. Trade complementarities are not strong. Australian firms remain uneasy about doing business in India. And their biggest concerns – corruption, red tape, enforcement of contracts, and the cost of doing business – are issues Australian governments can do little about.

At the societal level things are a little better. India is the fastest-growing source of in-bound migration, and Hindi is the third-most-spoken language in Australian homes. Yet perceptions of Australia in India remain stuck in a time warp. Racism, violence and the white Australia policy regularly figure in media coverage of Australia.

Yes, many Indian students come to Australia; they are a rapidly growing cohort in Australia’s schools, colleges and universities. But very few Australians want to study in India.

Equally, many Indian students are clustered in a narrow range of courses in which they are the dominant nationality. This limits the societal benefits one might expect to flow from having Indian students in Australia.

There is only one direct flight between India and Australia – an Air India flight to Delhi that alternates its daily departure port between Sydney and Melbourne. This compares to the more than 30 direct flights from Australian cities to more than a dozen Chinese cities, including places like Changsha as well as the mega cities of Shanghai and Beijing. The paucity of connections between India and Australia couldn’t be more graphically depicted.

The market and societal connections that provide the long-term ballast to the relationship are needed before a durable strategically effective partnership can exist. It is plainly in Australia’s interest to advance that goal. And it is this that motivates Turnbull’s visit to India.

But as the reluctant walking back of expectations on the trade agreement show, it is likely to be some time before the potential of Australia-India relations can be realised.

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