The Indian Finance Minister’s visit Down Under
Next time you look at your superannuation statement, know that some part of it may be invested in infrastructure in India. At least that is the hope of the Indian government as it embarks on a journey to attract investments in India.
Big cash pools are held in sovereign and superannuation funds which could find a home in a new Noida airport or a road corridor upgrade between Mumbai and Calcutta.
According to the Association of Superannuation Funds of Australia, Australia had superannuation assets totalling $2.05 trillion at the end of the March 2015 and with mandatory contributions of 9.5% pa, the pool will only grow.
Prime Minister Narendra Modi set the tone for the Australia-India relationship when he became the first Indian Prime Minister to visit this country in 28 years. Modi was welcomed warmly, not only by the expatriate Indian community, but also by the then Prime Minister Tony Abbott and both sides of Australian politics.
Indian Finance Minister Arun Jaitley is in the inner circle of the Prime Minister and his recent visit to Australia further signifies the importance that both countries want to accord to the relationship.
The challenge, however, is that in reality the bilateral trade between India and Australia lies stagnating at about $15 billion. It is also very narrow in its scope, being largely restricted to coal and education.
In fact, one could feel the frustration in the voice of the Indian High Commissioner Navdeep Suri as he spoke at the inaugural session of the Make in India Conference in Sydney. He challenged the status quo, wondering if it is on par with where the relationship between the countries can potentially be.
Warming to this theme, the Indian Finance Minister Arun Jaitley made the case for Australia to engage deeper with India. He urged Australian investors to consider options of manufacturing in India.
“An important focus for us, is to push Make in India to investors. The first industrial revolution bypassed India, in the second wind, we became a low-cost service provider and not a manufacturing country.”
The Finance Minister believes that the time is right to start pushing for the theme of Make in India. “There is an exodus of people from the agriculture sector as they seek other opportunities in services and manufacturing. Make in India can translate in actual reality for vast number of aspirational young Indians.”
India is experiencing strong GDP growth, though economists have noted that it has decelerated from about 8.4% to 7.4% in the last year. This is in spite of dropping oil prices which has helped the Indian economy to grow, as India is a net importer of oil.
In his address, Jaitley acknowledged that more can be done to push growth in India.
“Exports can grow, the monsoon can be better, but India has to invest for growth, and for that, manufacturing needs to have a reasonable space. There are other forces, such as an aspirational middle class, working to create growth rather than to impede it.”
Jaitley then quoted Malcolm Turnbull who last week praised India’s ability to function as a democracy against all odds.
The Australian Prime Minister said, “We wonder at the scale of the Chinese economic miracle and so we should – but my friends, the Indian political miracle is just as remarkable and just as inspiring as is India’s economic potential – the country is growing faster than China for the first time in recent history – and its favourable demographics.”
At a press conference later, when questioned about the impact which incidents like JNU have on the image of India overseas, Jaitley said it is not an issue of creating a dent to its image.
“No country, however liberal, can allow an agenda which openly speaks in terms of breaking the country. India is a democratic society, a liberal society which allows for free speech but even under our Constitutional order, sovereignty of India is an exception to the principle of free speech.”
What, would he say, are the three biggest achievements of the Modi government to date?
“The government is decisive, has maintained a direction, and has not made any major mistakes. Another popular perception is that corruption has disappeared from the corridors of New Delhi.”
And as for the challenges ahead? “These will be fighting poverty, strengthening India’s agrarian sector, and building our infrastructure sector.”
Over the longer term, while mineral exports will still form a large part of the India-Australia story, it seems as though the desire to attract investments in manufacturing and infrastructure will form the main theme for discussions at round tables between the two countries.
Earlier during his visit, Arun Jaitley attended the SP Jain School of Management where he met with the President of SP Jain, Nitish Jain, as well as members of the Faculty, and spent some time with the students. The Minister spoke to the students on the theme of ‘Reimaging the Indian Economy’. He drew attention to how India’s economic fundamentals had enabled it to maintain steady economic growth in an otherwise turbulent global scenario. Admitting that the growth of the Indian economy has essentially been fits and starts in the last decade, under the Modi government he promised more systematic growth.
Later, in front of over 200 invited guests he launched the Australian office of Union Bank of India. Speaking on the occasion, the Managing Director and CEO of Union Bank, Arun Tiwari acknowledged the historical links between India and Australia, but stated that he was excited about the future prospect of India’s economic growth and how India can be a world economic leader.
The Finance Minister inaugurated the new offices and noted that he had undertaken a similar responsibility in London and how delighted he was to be doing this now in Sydney.
“There is increasing economic integration in the world and it is good to note the reach now of Indian banks, such as the current expansion of Union Bank. With respect to India, banks play an important role in our society and have a large social obligation,” he said.
Another important item on Finance Minister Jaitley’s agenda was to present a strong argument to Australian superannuation fund managers as to why they should invest in India. With former Treasurer and now Chairman of the $118 billion Future Fund Peter Costello, Jaitley co-chaired a high level round table on the topic of investment in India with Kelly O’ Dwyer, Assistant Treasurer and Minister for Small Businesses.
From the Indian side, a high powered delegation of Federation of Indian Chambers of Commerce and Industry (FICCI), headed by its President Harshavardhan Neotia, had flown in to help the Minister sell his message. In his keynote address Arun Jaitley spoke about the broad investments opportunities in India. FICCI tabled a booklet detailing investment options for projects ranging from US$400 million upwards. While the participation was strong, attendees did note that very little Australian infrastructural money finds its way in India, or even Asia due to a general lack of understanding and confidence in these markets.
Later, a Memorandum of Understanding was signed between FICCI President Harsh Neotia and Australia India Business Council National Chair Dipen Rughani.
Next time you look at your superannuation statement, know that some part of it may be invested in infrastructure in India. At least that is the hope of the Indian government as it embarks on a journey to attract investments in India.
Read PREETI JABBAL’s article about when Arun Jaitley met AII’s Craig Jeffrey HERE