The Australia-India relationship in a changing world
Co-hosted by the Australian Institute of International Affairs and the University of Tasmania
Thursday 20 November 2014
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In September, Senator Lisa Singh and I went to New Delhi and met with political leaders, Members of Parliament, NGOs, academics, and experts.
It was particularly great to be able to take Lisa Singh with me. She has received a very high honour from the Government of India. She was in correspondence with Prime Minister Modi when he was the Chief Minister of Gujarat, so I got to trail on her coattails a little bit on this visit to India.
It’s one of the wonderful things about Australian multiculturalism – it gives us so many links with so many countries that are deep and sincere links because they are people to people links. We have a profound understanding of the many nations that make up the backgrounds of our people, remembering that about a quarter of Australians are born overseas and about half of all Australians have at least one parent born overseas.
Having Lisa there as one of the 400,000 people of Indian origin in Australia, was really a great demonstration of the very special bond between India and Australia and the very special characteristics of Australia as a multicultural society.
That visit was a visit designed to build on the good work that Labor in government had done. I was going to talk about the Rudd/Gillard years, but of course as far back as an Australian Labor Government supporting Indian independence, and being one of the first countries to do so.
THE RISE OF INDIA
Our visit coincided with a very special event. We were there on the 24th of September and the Indian Mars Orbiter spacecraft successfully moved into its Mars orbit at that time.
The Indian Space Research Organisation is the fourth space agency to reach Mars, and India is the first nation to achieve it on its first attempt.
This remarkable mission is not an end in itself – it is a demonstrator project to support technologies for India’s future interplanetary missions. The mission tells the story of a nation that takes thoughtful and deliberate steps to secure its future.
India has also been able to deliver its Mars mission at a lower cost than any other mission to date, with a total cost of around US$73 million. It has done this through a skilled domestic workforce, lower worker costs, home-grown technologies, simpler design, and significantly less complicated payload than other missions.
In an opinion piece in the English language daily The Hindu it was pointed out that the cost was equivalent to less than a single bus ride for each of India's population of 1.2 billion.
The Mars mission is reflective of the economic miracle of modern India.
Since the late 1980s the world's largest democracy and second most populous country has opened itself to the outside world, encouraging economic reform and foreign investment.
India’s position as a fast-growing and powerful economy has been recently reinforced by the recent election campaign of Narendra Modi. His commitments to speed government decision-making and remove the bureaucratic hurdles that have slowed development will give some confidence to foreign investors.
India is now on the radar of the world's leading economic and political powers, governments and private investors alike.
The thing that was striking about that Mars mission is that the announcement was made on the same day that Lisa and I were visiting one of the slums in Delhi, and so we saw first-hand the capacity of India and the constraint.
Despite an economic miracle that supports a burgeoning middle class and remarkable technological strides, many Indians remain impoverished, and inequality in fact is on the rise. According to the World Bank, 22 per cent of India’s population lives in poverty.
Economic growth rates in India averaged around 7 per cent between 1993 and 2010 and the benefits of that growth were shared more broadly than ever before in India. It enabled large numbers of people to be lifted out of poverty.
But at the same time, the gap between the very rich and the very poor continued to grow, and the gap between rich and poor regions in India also grew.
This sort of inequality is now accepted by the World Bank, the IMF, the G20, and even the most conservative of economic analysis, as causing an overall drag on growth.
These same institutions have accepted that the previous orthodoxy of “trickle-down economics” – that notion that unbridled capitalism is all it takes to lift people out of poverty, doesn’t bear too much scrutiny.
India is expected to overtake China in terms of population by 2028 according to UN projections, but the real capacity of India comes with the development of its people, not just the numbers, but the investment in those people.
Prime Minister Modi’s visit to Australia, which we have watched so closely this week, generated phenomenal excitement – I know that Lisa was one of the fan girls at the Allphones stadium in Western Sydney.
16,000 people – a rapturous welcome for Prime Minister Modi. Many of my colleagues were there. There was singing, and there was dancing. It was a very big deal.
In fact, the Victorians chartered a special train from Melbourne to Sydney – they called it the “Modi Express”.
I can tell you it’s not very often that we greet political leaders this way. I don’t know the last time an Australian Prime Minister got that sort of greeting.
This excitement, that was so very tangible this week in Australia, was not just about Prime Minister Modi as a person, although I am sure some of it was that very focused political support for him and for his agenda, but it was about a vision he has expressed for India, which is about both unlocking the full economic potential of the country, but also the full human potential of its people.
In his address to Parliament he said: “we have moved forward, thinking with ambition, acting with speed; seeking growth not just for growth, but to transform the quality of life of every Indian.”
The Prime Minister is reforming his country not just through continued reduction in poverty, but also through efforts to increase equality. He knows that the country’s population overtaking that of China is not going to be as meaningful in 2028 if 25 per cent of his people are still living without electricity.
Mr Modi says he will change this. Public investments in infrastructure and in national endowments are part of the solution he has laid out.
The IMF has found that government expenditures - particularly social expenditures - are closely linked to inclusive growth outcomes. It found that Indian states that boosted spending on education and attainment rates have experienced better growth outcomes. The virtuous growth circle is investment in education; better jobs; higher incomes; more investment in education ……and so it goes on.
This brings me back to another reflection on my visit to India – when I met with women who were participating in the Shikhar Microfinance project. This project gives more than 30,000 families in the slums of Delhi a chance at escaping poverty. And despite the incredible poverty, and the desperate situations in which people were living, the small amounts of money that were being earned by these women were prioritised almost universally on one thing – and that was the education of their children.
Of course, India has a public education system but many of these mothers were either taking the small amount they had to send their children to religious-based schools, in some cases not the religion that they were practicing at home, but they thought they would get a better quality of education, and if they couldn’t afford full-time school fees, they were paying for tutors, an afternoon a week or two afternoons a week.
These are people living in one room, maybe two rooms, maybe twice the size of this desk here. Some of them still without electricity, often without any plumbing, sorting through junkyards for little piece of fabric that they were washing and processing for recycling, making tiny little dolls clothes for a dollar a day. These are people who are really just surviving but their priority is educating their children and a great outcome for their kids is a job in a hotel, for example. Something that gives them inside work, security in the formal employment sector, that is what they wanted for their children.
I was so inspired by that commitment to education I saw from those women. They were from different part of India, different religions, and different castes, and all of them expressed that desire for their children to go to school, receive an education, and get jobs. They recognised the importance of education to giving their children the best chance of living a better life.
India is now a nation which can send an explorer to Mars but it still has millions of people to lift out of poverty, and there are immense expectations that Prime Minister Modi will do this, that he’ll use his electoral mandate and support to make economic reforms that will give greater prosperity to allow the social investment in people and to generate economic growth that actually benefits the vast number of people still to be lifted out of poverty.
The rise of India is also an enormous opportunity for us and for the world. Prime Minister Modi’s promised new markets to open as India's emerging middle class achieves a higher standard of living. He has promised increased trade and international cooperation and more importantly, he’s talked about the role that India will play in shaping the region for the future. As Australians, we are a tiny nation in terms of population, but we think of ourselves as playing a role internationally in shaping not just our region but the way our globe operates, the way that countries relate to one another, and I think that this is a terrifically important partnership for Australia into the future.
Under Prime Minister Gillard, two major steps were taken which lay a framework for Australia’s vision. The “Comprehensive Economic Cooperation Agreement” between Australia and India which launched negotiations in May 2011 under Prime Minister Gillard’s administration, upgrading our partnership with India. This followed a joint statement signed by former Prime Ministers Rudd and Singh upgrading bilateral relations to a “strategic partnership” level.
If you look at that work with India and also compare the strategic partnership secured by former Prime Minister Gillard with China, you see that Australia as a country has these two great opportunities as our neighbours grow to engage economically and strategically in our region. Both of these agreements deepen our previous relationships and indeed Prime Minister Modi made a particular point of telling Bill Shorten and I when we met this week that the agreements signed on social security, combating narcotics, transfer of sentenced persons, cooperation in the field of arts and tourism are all things that came out of that work that had been done previously by our government and he thanked us for our work.
In August, I spoke at the Confucius Institute at UNSW about how the growth of China brought with it not just great opportunities to us and for China but also great responsibilities.
I think it is very true to talk about India in these terms as well, that economic growth is a terrific opportunity for the people of India, it is a terrific opportunity for our businesses engaging with this growing middle class but it also brings with it expectations and responsibilities. It brings with it the domestic expectations of Indian citizens, of their quality of life and how it will change, but it also brings with it global expectations as well about the role that India will play in the globe.
Just as China will be a more significant participant in the global economy and in global institutions, India too will take its place on the world stage as an increasingly influential member of the global community.
Prime Minister Modi also spoke about this in his address to our Parliament. He called for greater cooperation between India and Australia in this “moment of enormous opportunity and great responsibility”. He said “Since my Government entered office, no region has seen more intense engagement on India's part than the Asia Pacific region - because we understand how deeply our future is linked to this region.”
So it is going to be very interesting over the next years and decades to watch what that greater engagement, that Prime Minister Modi acknowledges India will need to engage in, what that will look like, what form it will take, what structures will be used.
RELATIONS WITH CHINA
The world is watching the rise of India in the context of a changing region. Alongside India’s rise, we have been focused on the major political and economic shifts which are occurring in China.
As the world’s two most populous countries, both have immense opportunities and challenges. They are also the largest emerging economies in the world, and have growing middle classes with changing expectations.
And there is also a very interesting - I think it is fascinating for people who watch foreign affairs - evolving relationship between India and China.
When Xi Jinping visited Prime Minister Modi it was considered a very important visit, all eyes were on it. There is the longest contested land border in the world between India and China. There was an advance of Chinese troops into India while Xi Jinping was in India. People have been struggling to understand: what is the symbolism, why then, why pick this moment? The reason that there was so much fascination with that one event is because people are holding onto their breaths to find out what will the relationship between India and China be like. We sometimes as Australians always think about how we relate to India, how we relate to China, how we relate to the United States, how we relate to Japan, and forget that the intricacy between the relationship of our friends and neighbours are as significant an effect on our future as our own efforts to engage with each of those nations.
Both Xi Jinping and Prime Minister Modi in their visits have talked about their own determination to increase economic growth within the countries that have also talked about what that growth will look like and what it is designed to deliver for their people.
Xi Jinping’s China Dream speech at his government's third plenum talk about the reasons for growth in China is to continue to deliver an improved standard of living for Chinese people and as that standard of living increases of course the expectations of the middle-class change. You’ve got an increasing number of Chinese students studying overseas, you’ve got more tourists coming and going, China's leadership are wondering how they will continue to respond to those demands for a cleaner environment, better social services, more freedom of expression.
Prime Minister Modi’s agenda for economic growth including the ambitious targets for infrastructure and sanitation also give an enormous hope to the people of India about what growth will mean in terms of transforming their everyday lives.
The first meeting between these two new leaders was also closely watched. During the state visit Prime Minister Modi said of his relationship with President Xi: “we can reinforce each other's economic growth. We can contribute to peace, stability and prosperity in our region. And, we can give new direction and energy to the global economy.”
INDIA’S ROLE IN A CHANGING REGION
Prime Minister Modi has staked part of his reform agenda on India as a robust, well-functioning democracy in the region.
He has talked about India’s 3Ds: “Democracy, Demography and Demand” as taking a significant role in his “Make in India” campaign to attract more foreign investment.
When he talks about demographics, he is talking about a very young country that will be a driving force in the Asian labour market in the 21st century and the demand of a rising middle class with a higher disposable income.
And of course the response of neighbours like China, Japan and the US have meant that they have wasted no time in courting Prime Minister Modi since his election.
We have also prioritised our relationship with India, not just since the election, but before that as well.
Australia’s interaction with India is also a part of this - we need to take account of this juggle of suitors that India is experiencing with China, Japan and the United States – each of them vying for the affection of Prime Minister Modi and India.
CHANGES TO THE INDOPACIFIC AND TO REGIONAL ARCHITECTURE
One of the things that this will effect is how India relates to the existing international infrastructure that we use to make decisions as countries in our region and globally.
I would like to raise a couple of areas where this will be of particular interest.
One of them obviously is climate change. We’ve got a global agreement that we are heading for, we hope, in Paris next year. We’ve had some very important statements from the G20 about the necessity for countries to decarbonise their economies. And we’ve had very significantly both China and the United States, the world’s two largest polluters, sign up to an agreement that nobody thought possible just two weeks ago.
So what will happen? What role will India take when it comes to multilateral action on climate change? And the second question of course is how will India change its role as it grows in prosperity in multilateral fora, including the two new investment banks. The BRICS investment bank and the Chinese backed investment bank, the Asian Infrastructure Investment Bank. So watching those very important issues of how India will engage in these great challenges of the future I think will be of enormous interest to Australia and other countries as well.
India is the third largest carbon dioxide emitter after the United States and China, and it was very significant that Prime Minister Modi said in his address to the Australian Parliament that yes, he wants to keep buying Australian coal, and yes, he wants to keep buying Australian uranium, but he included in that statement about meeting the energy needs of the hundreds of millions of Indians that have no access even to basic electricity in their homes. He said we have to find fuel sources that don’t melt our glaciers. Now I think that is pretty significant because as I say, India, fast-growing, third-largest emitter of carbon dioxide, if India takes a path of looking for energy use sources from low carbon emission technologies, compared with if it takes a path of not caring whether its energy comes from low carbon or high carbon sources, compared with if India prioritises energy from renewable sources, that will make a huge difference to the global economics of energy supply.
The other area that will be very important to observe and work with India on is the New Development Bank and the Asian Infrastructure Investment Bank which both give India a huge opportunity to have investment within India from the New Development Bank which of course is set up by the BRICS country and India is going to be its inaugural president for the first six years. The Asian Infrastructure Investment Bank, India of course is also a founding member.
Both of those banks, potentially huge investors in Indian infrastructure, but both of those banks also with India as a founding member and guiding president for the first six years with the New Development Bank will be setting the agenda for the type of infrastructure that gets built, for the type of transparency in government arrangements around these banks as well. This is a response that comes from the emerging economies really being shut out of the institutions that were set up after the Second World War that don’t reflect the fact that China and India and these other emerging countries are now very significant economic players and a question for us has to be how much will we change international arrangements that are 50 years old, sometimes older, actually take account of the fact that economic power is changing. Instead of being part of the IMF, China set up its own bank. It has done that because the IMF does not recognise China's weight in the international community and has up til now been incapable of amending its own governance to recognise China as a growing power. Will the same happen for India or will we manage to change our global infrastructure or global architecture to take account of these changing shifts in power?
For us, it is a reminder of what happens when international organisations do not adapt to a changing world, and for India it’s a reminder of what changing architecture means for their own economy and their potential for global leadership. Prime Minister Modi said in our Parliament this week: “we do not have to rely on borrowed architecture of the past. Nor do we have the luxury to choose who we work with and who we won't.”
So there are a couple of challenges and a couple of opportunities that I’ve laid out for you. India has enormous capacity; we see it in its growing economy, fast-growing middle class, growing demographics and its capacity. The Mars expedition is a colourful way of describing the capacity but you see it in so many areas, yet it still has this demand from its own people, this great challenge of poverty and how it will take economic growth and spread the benefit of that so that it benefits not just for moral reasons the vast majority of people, but for its own continued economic strength, those benefits have to be shared and investment has to be made into lifting people out of poverty, investing in health and education, and our own place in the world, our own relationship with India and how India sits in our region. Can our architecture accommodate these rising powers? Do we need to do more to understand that the world is a changing place and that the organisations that have served us very well for many decades need to take account of those changing power relationships?