Peter Varghese, Australia’s secretary, Department of Foreign Affairs and Trade, has said that his country’s ability to trade with and invest in India will inevitably be driven in part by decisions New Delhi makes on economic reform and financial opening.
“Businesses would know only too well that India’s economy has undergone a protracted slowdown since March 2011, marked by a slump in investment and industrial output. GDP growth fell to 4.4 per cent in 2012-13. It is forecast to remain somewhere in the 4.5 to 5.5 per cent range over 2013-14 and many businesses are adopting a ‘wait and see’ approach in the lead-up to national elections due later this year,” said the former High Commissioner to India at the CUTS International 30th Anniversary Lecture on Monday.
On a positive note, he said Finance Minister Chidambaram and RBI Governor Rajan “have taken positive steps to address key concerns, including curbing the fiscal and current account deficits and shoring up capital flows”. The short term outlook may be below par but India’s strong medium-term fundamentals give cause for more optimism, he added.
He said signs that India’s federal system is working to show that good policy can also be good politics, “as more dynamic states compete to create a more favourable environment for private and foreign investment”, were also encouraging. ”
Efforts by these states to cut through regulation and bureaucracy, address infrastructure bottlenecks, introduce tax incentives, and provide easy access to land and power are leading to above-average growth in some states.”
Varghese, who spent three years in India during which the relations between the two contries went to an all-time high, said favourable demographics, prevailing trends of urbanisation and industrialisation, and room for productivity gains should enable India’s economy to achieve growth outcomes of 6-7 per cent over the next 20 years or more. “Reaching a high growth trajectory will depend on India getting its domestic policy settings right and investing in infrastructure, skills and institutions.”
He said Australia is well placed to partner with India on both the infrastructure and skills agenda and to share lessons learnt on policy reform. “Our key energy exports also provide the necessary drivers for further economic development in India, and we are committed to a long-term, broad based energy supply relationship.”