India country brief

Overview

India is a major regional power and one that is rising globally.  In 2009, the Australia-India bilateral relationship was elevated to a strategic partnership and 2014 saw reciprocal visits with then Australian Prime Minister Tony Abbott visiting India in September and Indian Prime Minister Narendra Modi visiting Australia in November.

India is Australia’s tenth largest trading partner and our fifth largest export market.   Bilaterally we are seeking to deepen our trade and investment links through the conclusion of a Comprehensive Economic Cooperation Agreement and we are enhancing regional security through the Framework for Security Cooperation.

Political overview

System of government

The Republic of India is a constitutional democracy made up of 29 states and seven union and national territories.  The Constitution came into force on 26 January 1950 and lists the powers of the Federal Government (known as 'the Centre' or 'Union Government'), those of the states and those that are shared responsibilities.  The President of India is obliged to act on the advice of the Council of Ministers, chosen by the Prime Minister.

Parliament is bicameral, comprising the 545-member Lok Sabha ('people's' or lower house) and the 245-member Rajya Sabha ('states' or upper house).  Lok Sabha members are elected by universal adult suffrage every five years (except for two nominated Anglo-Indian members) using the 'first past the post' voting system.  The Rajya Sabha is not subject to dissolution; one third of its members retire every second year.  Elections for the Rajya Sabha (upper-house) are not held concurrently with Lok Sabha elections.  One third of Rajya Sabha members are elected every two years by the legislative assemblies of the Indian states. 

Recent political developments

The 2014 Indian national election for the Lok Sabha (lower house) saw the Bharatiya Janata Party (BJP) and its National Democratic Alliance (NDA) partners form a new government.  The BJP won 282 seats in its own right in the 545-member Lok Sabha, the first time a single party had obtained a parliamentary majority since 1984.  Other parties in the NDA won a further 54 seats. 

The electoral campaign of Narendra Modi, the leader of the BJP and Prime Minister of India, was characterised by a message of economic development and good governance.  Prime Minister Modi and his cabinet were sworn in on 26 May 2014. 

Foreign relations

India's foreign policy has traditionally reflected a broad national consensus on security and foreign relations.  Since independence in 1947, India has sought to position itself as a major international player.  It has been at the forefront of developing country activism and was a founding member of the Non-Aligned Movement (NAM).  India has also been an active member of the United Nations and the Commonwealth and has expanded its cooperation with East Asia, including with Association of South East Asian Nations (ASEAN) countries and as a member of the East Asia Summit (EAS). 

India was granted full dialogue partner status with ASEAN in 1995 and was admitted as a member of the ASEAN Regional Forum in July 1996.  As its economic power develops, India is seeking to consolidate further its international role and to increase its focus on 'economic diplomacy', particularly to secure energy supplies and boost economic growth.  It is taking a more prominent role in fora such as the World Trade Organization and the G20. India is also lobbying for membership of the Asia Pacific Economic Cooperation (APEC) grouping and for a permanent seat on the United Nations Security Council, both of which Australia supports.

India is the major power in South Asia and its relations with its neighbours set the tenor of foreign relations in the region.  India's strategic focus has traditionally been on its neighbourhood although it has sought to broaden this focus, notably towards East and South East Asia.  It is active within regional groupings such as the South Asian Association for Regional Cooperation (SAARC), the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and within the Brazil, Russia, India, China and South Africa (BRICS) group.

 'Act East' policy

Since 1991, the combined multilateral, regional and bilateral focus on trade and engagement with Asia through the ‘Look East’ policy has been a major strand of Indian foreign policy.  Originally signalling India’s desire for economic and diplomatic engagement with South East Asia, it developed over time into a broader and deeper network of security and defence ties across the Indo-Pacific.  Speaking at the 12th India-ASEAN Summit in Nay Pyi Taw, Myanmar, in November 2014, Prime Minister Modi reaffirmed his government’s commitment to substantial engagement with South East and East Asia by announcing that India’s ‘Look East’ policy had become an ‘Act East’ policy.

Relations with other key countries

The development of the India-United States relationship in recent years has been driven by increasing recognition, in both India and the United States, of each country's strategic and economic importance to the other.  The importance of India to the United States was underscored in October 2008 with the signing of a bilateral nuclear agreement enabling civil nuclear trade between the two countries. In January 2015, during a visit to India by President Obama, the two countries finalised an Administrative Arrangement to implement the 2008 agreement.

As major partners, India and the United States engage in a strategic dialogue. India has extensive land borders with China, strong memories of the short border war with China in 1962 and is conscious of China's role in the region and links with Myanmar and Pakistan.  Despite this, in recent years India has sought to develop friendly and pragmatic relations with China.  The two countries have made progress in addressing border disputes, although the issue remains sensitive, particularly in relation to the north-eastern Indian state of Arunachal Pradesh.  China is India's largest trading partner, with bilateral merchandise trade totalling US$70 billion in 2014.  China was India's largest source of merchandise imports and fourth-largest destination for merchandise exports (in 2014).

India's relationship with Pakistan has been problematic since the time of partition at the end of British rule in 1947.  Their ongoing territorial dispute over Kashmir, in India's north-west, is a serious obstacle to normal relations between the two neighbours.

Following then Prime Minister Vajpayee's 'hand of friendship' overture to Pakistan in April 2003, both countries normalised diplomatic relations, implemented a ceasefire along the Line of Control (LOC) and re-established some transport links. (The LOC is the military control line between the Indian and Pakistani-controlled parts of the former princely state of Jammu and Kashmir.)  In February 2004, the two sides agreed a process for discussions to resolve key issues, called the Composite Dialogue.  .  Following this 2004 agreement, there have been several successful bilateral meetings designed to build confidence and make progress on negotiations.  Most recently, in December 2015, Prime Minister Modi met Pakistan Prime Minister Nawaz Sharif in Pakistan. This was the first visit to Pakistan by an Indian prime minister since 2004. Despite the peace process, however, tensions continue in Kashmir.

Economic overview

In 2012, India became the world’s third largest economy in terms of purchasing power parity and is forecast to be the fastest growing major economy in the world from 2016.  Achieving India’s growth potential will require continued economic reforms to drive the modernisation of the Indian economy and ensure sustainable growth in key sectors.

India’s post-independence era economy (1947-1991) was characterised by a planned approach to development, with extensive regulation and protectionism.  A balance of payments and foreign currency reserve crisis in 1991 sparked a process of economic liberalisation that helped India move towards a market-based economy.  For a decade from the late 1990s, the Indian economy had an annual average growth rate above seven per cent but this started to slow in early 2011 when GDP growth dipped to below five per cent. 

Following the decisive victory of Prime Minister Modi in the May 2014 elections, India started to show signs of economic recovery, aided by more buoyant sentiment and a sharp slide in inflation to multi-year lows.  Steps taken by the Reserve Bank of India to restore balance of payments stability and reduce currency volatility also contributed to an improvement in India’s fundamentals.  But despite the improved outlook, significant challenges remain to be addressed, including inadequate infrastructure, the ease of doing business and agricultural productivity.

Another challenge is to ensure that the benefits of economic growth are experienced more widely.  Despite the fact that tens of millions have been lifted out of poverty since the 1990s, average incomes and literacy levels remain low and India is one of the largest recipients of concessional finance from the World Bank (India borrowed USD1.7 billion in 2015–16).  While still low, India's score in the United Nations Human Development Index (HDI) has increased over recent decades.  India's HDI ranking was 130th in 2015, up from 135th in 2014.  India remains home to around 400 million extreme poor, around a third of the world’s total.

Key economic indicators

The World Bank describes India as the “bright spot” in a generally gloomy global outlook for developing countries.  It forecasts India’s GDP will grow at 7.8 per cent in 2016 and 7.9 per cent in 2017 and 2018, making it the fastest growing major economy.

Low global oil prices, a positive base effect, and tight monetary policy kept consumer price inflation benign at an average of 4.8 per cent for the first half of 2015. Core inflation has trended downward for nearly two years and is likely to remain around 4 per cent in 2016.

India has also sharply curtailed its current account deficit to 1 per cent of GDP in 2015 (from 5 per cent of GDP in mid-2013). This has helped India’s central bank rebuild its reserves while net FDI flows have remained positive. Investment growth is expected to continue strengthening in India due to government efforts to accelerate infrastructure development and boost Public Private Partnerships (PPPs).

This makes India well-positioned to withstand near-term headwinds and volatility in global financial markets due to reduced external vulnerabilities, a strengthening domestic business cycles and a supportive policy environment.

Bilateral relationship

Australia has placed India at the forefront of its international partnerships.  Both governments recognise there is significant potential for further cooperation across a broad range of areas.  Two-way Prime Ministerial visits in 2014 built significant momentum in the relationship and affirmed the Strategic Partnership agreed to in 2009.

Australia and India established diplomatic relations in the pre-Independence period, when the Consulate General of India was first opened as a Trade Office in Sydney in 1941.  India's first High Commissioner to Australia arrived in Canberra in 1945.  In March 1944, Lieutenant-General Iven Mackay was appointed Australia's first High Commissioner to India. 

Australian and Indian Foreign Ministers meet annually for the Foreign Ministers' Framework Dialogue (FMFD) alternately held in Australia and India.  Similarly, Australian and Indian Trade Ministers meet annually for the Joint Ministerial Commission (JMC) and Education Ministers meet for the India–Australia Ministerial Dialogue on Education Cooperation. Australia’s Industry Minister also holds an annual Energy Security Dialogue with his or her Indian counterpart. Australian and Indian Defence Ministers meet regularly.

While Australia does not have a bilateral development cooperation program with India, we provide support through our global and regional aid investments and technical assistance activities.

Official visits

Foreign Minister Julie Bishop visited India on 12-15 April 2015 for the Foreign Ministers’ Framework Dialogue (FMFD).  The annual meeting between Australia’s Foreign Minister and India’s Minister for External Affairs, the FMFD is the central mechanism for advancing the ambitious bilateral agenda.  During her visit for the FMFD, Ms Bishop delivered the inaugural Indo-Pacific Oration at a leading Indian strategic think-tank.

Then Minister for Trade and Investment Andrew Robb visited India four times in 2015, reflecting the high priority of developing trade and investment ties with India.  Mr Robb’s January 2015 visit, accompanied by then Parliamentary Secretary Colbeck, promoted Australia Business Week in India (ABWI) – involving 120 events and 14 industry sectors in eight cities.  Mr Robb visited India in April, June and October 2015 for talks on bilateral trade and investment including the Comprehensive Economic Partnership Agreement (CECA).

In June 2013 Australia hosted the then Indian Defence Minister A.K. Antony, the first bilateral visit of an Indian Defence Minister.  At the meeting the ministers agreed to continue bilateral naval exchanges to build confidence and familiarity and to work towards a bilateral maritime exercise – the inaugural exercise, called AUSINDEX 15, took place in September 2015 in Visakhapatnam, India. The same month saw India’s Defence Minister host then Australian Defence Minister Kevin Andrews for a bilateral visit.

The Prime Minister of India, Narendra Modi, paid an official visit to Australia from 16-18 November 2014.  Prime Minister Modi held wide-ranging talks with then Prime Minister Abbott and addressed a joint sitting of both houses of the Parliament (the first time an Indian prime minister has done so).  He also visited Brisbane, Sydney and Melbourne, where he met political leaders, academics, businesspeople and sporting figures and addressed members of the Australian Indian community. 

Former Prime Minister Abbott visited India in September 2014, the first foreign leader to conduct a bilateral state visit to India since the election of the Modi government. 

Prime Minister Turnbull had a first meeting with Prime Minister Modi on the margins of the G20 meeting in Turkey in November 2015 at which they had a wide ranging discussion on bilateral and global issues.

Dialogues

The annual Maritime Dialogue was agreed in November 2014 under the Framework for Security Cooperation. It was held for the first time in November 2015 in New Delhi.  The Maritime Dialogue provides an opportunity to draw together the various strands of our maritime engagement.

Inaugural Cyber Policy Talks between DFAT and India’s Ministry of External Affairs took place in New Delhi on 24 August 2015. The purpose of the talks is to create a forum for strategic level discussion of cyberspace policy issues including bilateral, regional and international dimensions and to promote practical cooperation on cyber policy and cyber security issues, including common cyber threats. 

The senior officials-level Joint Working Group on Counter-Terrorism and Transnational Crime met in New Delhi on 27 August 2015. Prime Ministers agreed in November 2014 (under the Framework for Security Cooperation) to include transnational crime in the working group, which had previously focused on Counter-Terrorism.

The East Asia Talks are held at senior official level. Four rounds have been held to date, most recently in Canberra in October 2015.

Australia and India agreed in 2015 to hold annual meetings of foreign and defence secretaries (2+2 meeting) to enhance foreign policy and security cooperation.

In 2014 India hosted the inaugural Indian Ocean Dialogue in Kochin, successfully bringing together officials, academics and strategic thinkers from 26 countries to identify and discuss policy approaches to key challenges and opportunities facing the Indian Ocean region.  Australia hosted the second Indian Ocean Dialogue in Perth in September 2015, in close collaboration with India. 

Separately, Australia, India and Indonesia interact under the auspices of the 1.5 track Trilateral Dialogue on the Indian Ocean (TDIO), addressing an agreed issue relevant to the Indian Ocean each year.  The TDIO was held in New Delhi in October 2013 and Canberra in September 2014. India is expected to host the next dialogue in 2016. 

Australia–India Council

The Australia–India Council (AIC) was established in 1992 by the Australian Government to broaden the bilateral relationship through increasing levels of knowledge and understanding between the peoples and institutions of Australia and India.  The AIC comprises a board of members with interests in the Australia–India relationship, drawn from a cross-section of the Australian community.  The AIC is serviced by a secretariat located in the Department of Foreign Affairs and Trade in Canberra.  The Australian High Commission in New Delhi manages the AIC's activities in India. Find the AIC on Facebook here.

Community presence in Australia

Approximately 450,000 people of Indian descent live in Australia. Between 2010 and 2015, 180,000 Indian migrants arrived in Australia, more than from any other country. India is also Australia’s largest source of skilled migrants and the second largest source of international students; 53,568 Indians studied in Australia in 2015.

Treaties and memoranda of understanding

Cooperation between India and Australia spans a range of areas.  Notable areas of cooperation include Treaties and Memoranda of Understanding (MoUs) on Air Services; Civil Space Science, Technology and Education; Combating International Terrorism; Customs; Defence Cooperation; Extradition and Mutual Legal Assistance in Criminal Matters; Intellectual Property; Civil Nuclear Cooperation; Skills Training Cooperation and Technical Vocational Education and Training (TVET); Social Security; Student Mobility and Welfare; Transfer of Sentenced Persons; Arts and Culture; Counter-narcotics; Water Resource Management; Sports; Tourism; and Wool and Woollen Products. 

Bilateral economic and trade relationship

The Australia–India economic relationship has grown significantly in recent years.  Australia's strength in exporting primary products, particularly minerals and energy, as well as services such as education, positions us well to supply growing Indian industrial and consumer demand.

There are still major barriers to trade with India, despite recent reforms.  The IMF has highlighted the importance of continued tariff reduction and the lowering of administrative barriers to trade.  Indian tariff rates and trade barriers more generally remain among the highest in the world.  In addition to tariffs, India imposes various duties, such as safeguard and anti-dumping duties, and non-tariff restrictions such as import bans and standards or certification agreements.

Two-way goods and services trade between Australia and India totalled $18 billion in 2014-15.  Major Australian exports to India in 2014-15 included coal ($5.5 billion), education-related travel ($2.1 billion) and gold ($903 million).  Major Australian imports from India in 2014-15 were refined petroleum ($910 million), personal travel services ($561 million), business services ($481 million), medicaments ($247 million); pearls and gems ($239 million); and passenger motor vehicles ($170 million); .

In 2014-15 Australia's goods exports to India totalled $9.8 billion, or 3.8 per cent of total goods exports, making India our fifth largest goods export market.  Total goods imports equalled $3.8 billion.  Australia exported $2.9 billion in services to India in 2014-15, primarily in education-related travel services and other personal travel.  Australia imported $1.5 billion in Indian services.

The total stock of Australian investment in India totalled $9.8 billion at the end of 2014, with Indian investment in Australia equalling $11.0 billion.  Australian investment in India covers a range of sectors, including manufacturing, telecommunications, hotels, minerals processing, food processing, oil and gas and the automotive sector.  The top Indian software firms – Tata Consultancy Services, Satyam, Infosys, Pentasoft and HCL – are represented in Australia and have a small but growing market presence.  There is strong Indian interest in investing in the Australian energy and resources sector.

Education is an area of increasing importance to the bilateral relationship.  Australia is a major destination for Indian students studying abroad, who recognise the high quality and cost competitiveness of Australian education services.  53,568 Indians studied in Australia in 2015 – an increase of 15.7 per cent from 2014 – and India was the second-largest source country for overseas students in Australia.  Successive Australian Governments have taken action to ensure the safety of all international students studying in Australia and the Indian government has expressed appreciation for the steps Australia has taken.

Australia and India have instituted a program of closer cooperation on education matters.  Since 2009, education ministers have met annually for the Australia-India Ministerial Dialogue on Education Cooperation.  The Australia India Education Council builds partnerships between India's Sector Skills Councils and Australia's Industry Skills Councils in key industry areas. 

Australia–India Comprehensive Economic Cooperation Agreement (CECA)

Negotiations to conclude a Comprehensive Economic Cooperation Agreement (CECA) between Australia and India were launched in 2011.  There have been nine rounds of negotiations, the most recent of which was held in September 2015.  During official visits to India and Australia in September and November 2014 respectively, former Prime Minister Abbott and Prime Minister Modi renewed both countries' commitment to an early conclusion of an equitable, balanced, comprehensive and high quality agreement. 

When concluded, the CECA is expected to encourage two-way investment and further strengthen Australia’s bilateral economic relationship with India. Independent modelling conducted in 2008 for a preceding study indicated that an Australia–India CECA could result in a net increase in Australia's GDP by up to USD 32 billion (AUD 45.5 billion) and India's GDP by up to USD 34 billion (AUD 48.3 billion) over a period of 20 years.

Australia and India are also involved in the Regional Comprehensive Economic Partnership negotiations – an ASEAN-centred proposal for a free trade area which would initially include the ten ASEAN member states and those countries which have existing FTAs with ASEAN.

Australia–India CEO Forum

The Australia–India CEO Forum is a mechanism for business from both countries to engage directly on ways to build the bilateral trade and investment relationship.  The Forum most recently met in New Delhi in June 2015.  The current co-chairs are Mr Sam Walsh, Chief Executive Officer of Rio Tinto, and Mr Gautam Adani, Chairman of Adani Group.  The Forum includes Australian and Indian business chiefs from a broad range of sectors, including energy and resources, agribusiness, the financial sector, telecommunications, IT, education and pharmaceuticals.

Joint Ministerial Commission

Australia–India Joint Ministerial Commission (JMC) meetings are held regularly, enabling interaction at a government and business level on a range of trade and investment related issues.  There are also joint working groups (JWGs) in specific areas, including Energy and Minerals, Science and Technology, Education and Tourism.

New Colombo Plan

Under the New Colombo Plan, 900 Australian undergraduates are studying and completing internships in India during the 2015-16 period.

Last Updated: 9 March 2016