Australian business: where the bolly hell are you?

It really is going to be an Indian summer for Australian exporters and investors with Australia’s expanded commitment to the sub-continent. The Australian Trade Minister Simon Crean has just announced an extension of Australia’s diplomatic and commercial resources in India.

The expansion includes the establishment of new Austrade offices in Ahmedabad, Chandigarh, Jaipur, Kochi and Pune and offices in Bengaluru, Hyderabad and Kolkata to bring the total number of Australian trade offices in the sub-continent to 11.

The timing of expansion is spot on given the rapid rise of India in terms of Australian trade. While we’ve seen China grow as an export destination at test match pace, India has moved up our export ranks like an Indian Premier League 20/20 match. Ten years ago, India was not even in our top 10 export destinations, now it is in the top five. In fact, it recently passed the US, as our 4th largest export destination, accounting for $18.8 billion or 6.6% of our exports.

India now joins China, Japan and Korea as ‘The Big 4’ in Asia who account for just under $140 billion or nearly half of our total exports. There are now over 2,100 Australian businesses exporting goods to India with a rapidly growing services sector to the tune of $4 billion two-way services trade between India and Australia.

Why is it so? It’s partly due to the rapid rise of India’s economy in terms of scale. In fact, according to the Reserve Bank, India’s real GDP has tripled since 1990 (while Europe and the US’s real growth has increased by 50% over that period, and China’s has grown by six times its 1990 level). India’s industrial production has also grown, with Indian car sales, for example, trebling over the past eight years.

But is it all rocks and crops? Certainly coal, gold and other resources have played an important role in India’s rise given the commodity boom over the decade but it’s been happening at the “chalkface” as well as at the coalface.

The recent visits by Australia’s leaders to reassure India about Australia’s commitment to its education sector is testament to how important this relationship is. This is not surprising given that India, together with China, accounts for one third of all students in Australia (compared to only 9% a decade ago) and is very important to Australia’s $15.5 billion plus education export sector.

India’s rising middle class is opening up tourism export opportunities as well. In fact, in 2008, the number of Indian visitors to Australia crossed the 100,000 mark with 116,000 visitors coming to our shores compared to 95,200 in 2007 which is an increase of 22%.

But India is an investment story as much as a trade story when considering the contribution Indian investors made to Australia’s development. Indian investment in Australia has increased 10-fold over the decade to the tune of over $1 billion, according to KPMG research, and has diversified significantly into pharmaceuticals, ICT, healthcare, and consumer good as well as into resources.

All the major global Indian brands are in Australia such as TATA Infosys, Wipro and Dr Reddy’s labs, along with some major financial institutions such as the State Bank of India, Union Bank and the Punjab National Bank.

For their part Australian businesses are also looking more to India as an investment destination and the expansion includes the establishment of a new Investment Commissioner in Mumbai. Australia’s corporate presence in India includes many major infrastructure companies such as Leightons, Snowy Mountains Engineering Corporation (SMEC) along with household names in Corporate Australia like Macquarie, Woolworths, Qantas and ANZ bank. Also franchisees are finding India to be a lucrative market with Cookie Man, Accor Hospitality and Flight Centre taking advantage of the growth of India’s young consumer orientated middles class.

Of course, the Commonwealth Games will be held in New Delhi next year and a special Trade Commissioner for Sport will be established to help Australian companies win contracts in Delhi. At the Commonwealth Games in Melbourne in 2006, one in five business visitors were from India, and the passing of the baton from Delhi to Melbourne has already brought business benefits. So far, 27 Australian businesses have already won deals worth an estimated $45 million, so the trade spin-offs from sport are already clear to see. Nine of our top 20 exporter destinations are in the Commonwealth, so there is business potential to be leveraged from Delhi (and indeed the FIFA World Cup in South Africa in 2010 and the London Olympics of 2012).

And speaking of sport, the changing role of cricket illustrates how much things have changed between Australia and India in recent years. In the 1970s and 1980s, Australian cricketers wouldn’t look forward to a tour of India and the only Australian visitors were missionaries or the odd hippy heading to Goa. Now a broader cross section of Australians are visiting India for both business and pleasure and the modern day cricketer is not only embracing the IPL, but is also learning Hindi, singing with Bollywood stars, supporting charities and writing cook books.

In fact, when I was last in Mumbai, I interviewed a former Australian test cricket legend Adam ‘Gilly’ Gilchrist, who is now an ambassador for The University of Wollongong in India. Gilly said that his generation of cricketers represented the transition from the old school who abhorred a tour of the sub-continent to the new generation Y who are keen India-ophiles. Gilchrist himself was greatly affected by India, and like his former captain Steve Waugh is committing part of their post-cricket life to India. As he put it: “A tour of India is not just a cricket tour. It’s a life experience”.

And with this expansion, India will certainly be changing the business life of many Australian exporters and investors in the years to come.

Tim Harcourt is Chief Economist with the Australian Trade Commission and the author of The Airport Economist.