India country brief

Overview

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

India is Australia’s 12th largest trading partner and our seventh 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 that includes five principal pillars: strategic cooperation; energy and climate change; education and development; economics, trade and agriculture; and science and technology, health and innovation. In addition, the United States and India have been expanding cooperation in a range of other areas, including through a CEO Forum.

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 Burma 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$66 billion in 2013.  China was India's largest source of merchandise imports and third-largest destination for merchandise exports (in 2013).

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.  Both sides have expressed their intention to revive the dialogue.  Following this 2004 agreement, there have been several successful bilateral meetings designed to build confidence and make progress on negotiations.  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 set to be the fastest growing major economy in the world.  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 $948 million in 2012–13).  While still low, India's score in the United Nations Human Development Index (HDI) has increased over recent decades.  India's HDI ranking was 135th in 2014.  India remains home to around 400 million extreme poor, around a third of the world’s total.

Key economic indicators

In late January 2015, the Central Statistical Office of India revised its GDP growth figures for 2012-13 and 2013-14.  The revisions stemmed from rebasing prices (from 2004-05 to 2011-12), adopting GDP at market prices (rather than factor cost) and broadening the activities measured.  This, together with an improving outlook for the Indian economy, led the IMF to revise its growth forecast for India to 7.2 per cent in the current fiscal year to March (up from 5.6 per cent) and 7.5 per cent next year (up from 6.3 per cent). 

Growth is expected to be supported by exports and resurgence in industrial production.  Strengthening exports and declines in oil prices and gold imports have contracted the current account deficit (CAD) in recent years, from 6.7 per cent of GDP in late 2012 to 1.6 per cent of GDP in the December quarter 2014. 

CPI growth has declined sharply, from a peak of 11.2 per cent in November 2013 to around 5.0 per cent since late 2014, prompting the Reserve Bank of India to cut interest rates twice since the start of 2015.  The decline is the result of a number of factors including subdued food inflation and declining global energy and commodity prices.

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 annual Foreign Ministers’ Framework Dialogue (FMFD).  The annual meeting between Australian Foreign Minister and Indian Minister for External Affairs, the FMFD is the central mechanism for advancing the ambitious bilateral agenda.  Ms Bishop also met with Indian Ministers for Defence, Finance, Water and Culture to progress initiatives across the relationship, including the CECA, New Colombo Plan, and strategic and security cooperation.  Ms Bishop delivered the inaugural Indo-Pacific Oration at a leading Indian strategic think-tank.

Minister for Trade and Investment Andrew Robb led Australia’s largest-ever business mission to India for Australia Business Week in India (ABWI) from 9-16 January 2015, building on the growing economic ties between the two countries.  ABWI included around 450 Australian business leaders from a wide range of sectors, including resources and energy, infrastructure, transport, agribusiness and food, financial services, health and medical, sport, cultural services, tourism, education and training.  Participants were involved in investment forums and other industry-specific events in a number of Indian cities including New Delhi, Mumbai, Ahmedabad, Kolkata, Jaipur and Chandigarh.  Mr Robb also visited India in April 2015 to advocate support for the CECA negotiations which are currently underway, to enable an outcome in 2015.

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 Prime Minister Abbott, addressed a joint sitting of both houses of the Parliament (the first time an Indian prime minister has done so) and met the President of the Senate, the Speaker of the House of Representatives and the Leader of the Opposition in Canberra.  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.  He visited research, cultural and historic institutions.  A number of agreements were signed and new initiatives launched.

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.  Mr Abbott met with Prime Minister Modi, President Mukherjee, Indian government ministers and Indian business representatives.  During the visit Australia and India signed a Civil Nuclear Cooperation Agreement, as well as a number of memoranda of understanding.  Prime Minister Abbott announced further Australian support for the Australia-India Strategic Research Fund ($20 million over four years) and announced the roll-out of the New Colombo Plan in India from 2015.  The Prime Minister highlighted the potential for increased economic engagement between Australia and India and travelled with an Australian CEO delegation.  Trade and Investment Minister Robb accompanied the Prime Minister. 

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 – which is expected to take place in the second half of 2015.

Indian Ocean Rim Association (IORA)

In November 2013 Australia assumed the role of Chair of the Indian Ocean Rim Association (IORA) from India.  Since assuming the Chair, the two countries have continued to work closely together to build a safer and more prosperous Indian Ocean region. 

As the only ministerial-level forum that spans the Indian Ocean, IORA focuses on building effective, practical regional cooperation in the six priority areas of maritime safety and security, trade and investment facilitation, fisheries management, disaster risk reduction, tourism and cultural exchanges and academic, science and technology cooperation.  Women’s empowerment is a cross cutting issue.

Outcomes from the 14th Council of Ministers’ Meeting in Perth in October 2014 included an IORA Economic Declaration on shared principles for boosting economic growth in the region, including by identifying the blue economy – marine economic activity – as a key driver of growth for Indian Ocean rim economies. The Perth meeting also saw the establishment of an IORA Economic Diplomacy Fund, an increased focus on business engagement and the signature of a Memorandum of Understanding on Search and Rescue Cooperation in the Indian Ocean.

Dialogues

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 will host the second Indian Ocean Dialogue in 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. In 2015, Indonesia will host the TDIO in Jakarta.

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.

Community presence in Australia

Approximately 450,000 people of Indian descent live in Australia.

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 $14.8 billion in 2013-14.  Major Australian exports to India in 2013-14 included coal ($5 billion), education-related travel ($1.5 billion) and copper ore and concentrates ($943 million).  Major Australian imports from India in 2013-14 were personal travel services ($676 million), business services ($376 million), passenger motor vehicles ($234 million); pearls and gems ($224 million) and medicaments ($197 million).

In 2013-14 Australia's goods exports to India totalled $8.4 billion, or 3.1 per cent of total goods exports, making India our fifth largest goods export market.  Total goods imports equalled $2.9 billion.  Australia exported $2.1 billion in services to India in 2013-14, 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.  There were more than 63,000 Indian students studying in Australia in 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.  In 2014, Prime Ministers Abbott and Modi renewed both countries' commitment to the conclusion of a balanced and mutually beneficial agreement by the end of 2015.  The seventh round of negotiations was held in Canberra in April 2015.  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 US$32 billion (A$45.5 billion) and India's GDP by up to US$34 billion (A$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 held its first meeting in New Delhi in March 2012.  The current co-chairs of the forum 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.


Last Updated: 2 October 2014