Only 8% of Indian households own a car – so big growth is ahead
INTO INDIA has consistently said India is the growth story of this century.
Now Anish Mathew, CEO and CIO of the very successful Sundaram Asset Management Singapore Pte Ltd, has found a unique way to describe why India is indeed THE growth story.
6 big changes in India
The number of income tax filers has increased by 57.5% between FY15 and FY21. This is obviously the impact of the growing use of Aadhar (biometric unique identity card) as the preferred KYC document and the implementation of GST, both of which is pushing up the tax compliance in the country.
Indirect (GST) tax base stood at 14mn in November 2022, a 2.3x increase from mid 2017.
Number of PAN cards (unique tax identity number issued by the Income Tax Department) allotted has increased by 2.5x in the last 7 years.
80% of the railway tracks were electrified as of end FY22 as compared to 31% in FY11.
Road infrastructure measured in number of kilometres has increased by 36.6% in the last 11 years.
Major port capacity has nearly doubled in the last 8 years.
5 reasons growth will boom
Only 8% of the households owned a car, 24% an air conditioner and 38% a refrigerator.
Only 1% of Indians account for 45% of all flights.
Only 3% of Indians make up all unique card holders.
Only 2.6% of Indians invest in mutual funds.
The Indian diaspora remitted USD 100bn into the country in 2022, eclipsing the gross FDI flow during the same period.
Mathew advises that the three big growth drivers for the next decade are consumption (driven by the Demographic Dividend and rising incomes); manufacturing, and; digitisation (which is the formalisation of the Indian economy)
He makes a powerful case for investment and trade with India.
This is such a refreshing shift from the rhetoric about the QUAD (India, Australia< Japan and USA) so called strategic alignment for the “Indo-Pacific Region”.
One of the clumsiest terms of recent diplomacy has been the concept of an “Indo-Pacific Region”. A quick glance at a map shows this to be wide of the mark.
But the same glance at the map will quickly show why India and Australia worry about the Indian Ocean region – they both need this area to be safe and open for maritime activity and stable for economic development. It is also realistic for these two countries to combine for peace and stability in the Indian Ocean.
It is just not realistic to expect India to share in security interests for the Pacific.
India has traditionally been a “non-alignment” country, which happens to be close in defence to Russia.
It is now promoting the concept of “Multi-Alignment”. Of course, the USA (and Australia) do not understand this at all, believing in the power of taking sides.
That is why they have been so hopeful that India coming into the QUAD is a sign of India shifting towards “taking sides” and moving “our” way.
Here is one piece of evidence that India maintains an independent and “Multi-Alignment” program – at a time when the western alliance is condemning Russia, this week India and Russia have announced progress towards a free trade agreement, to build stronger trade and investment in both countries – according to Russia’s deputy prime minister Denis Manturov, speaking at an event in New Delhi with India’s foreign minister S Jaishankar on Monday.
There you go. Multi-alignment is the modern incarnation of India’s historic “Non-alignment”.
India’s “north east region” has long been neglected and is little known among western leaders – but it has a crucial future because of the role it can play in India’s strategic and commercial connectivity in the surrounding region.
The role of China in the Indo-Pacific increases the focus on this sensitive region.
India is now giving the NER priority – there are around 30 major road and highway links under construction, a complex process when border crossings are involved. There are also around 10 major railway construction projects including bridges and new lines.
This has been so well described by Sreeparna Banerjee and Ambar Kumar Ghosh, “India’s Northeast: Gateway to Connectivity with Eastern Neighbours,” ORF Occasional Paper No. 395, March 2023, Observer Research Foundation.
India’s northeast consists of eight states—Arunachal Pradesh, Assam, Manipur, Tripura, Sikkim, Mizoram, Meghalaya, and Nagaland. It shares 5,812 km of international boundaries with the neighbouring countries of Myanmar, China, Bangladesh, Nepal, and Bhutan. It is landlocked; seven of the eight states are linked to the rest of India only through the Siliguri Corridor in North Bengal—a narrow strip of land (22-km wide) that is also called the ‘Chicken’s Neck’. The corridor is flanked by Nepal in the north and Bangladesh in the south.
This region can serve as a pivotal connecting space between India and its neighbours to the east in South Asia, as well as to East and Southeast Asia and beyond, enhancing the country’s diplomatic, infrastructural, and commercial engagements.
India’s foreign policy priorities, reflected in its ‘Act East’ and ‘Neighbourhood First’ policies, also bring the northeast into focus as a connectivity gateway to the wider Indo-Pacific.
Japan, with its long-standing expertise in the infrastructure sector, continues to play a significant role in developing physical connectivity projects within and across the northeast.
Australia shares many of the strategic goals of India, and now through the QUAD (India, Australia, Japan and USA) the countries are closer together through their commitment to democracy, open and free cultures and more.
The focus on this region will continue – India is crucially positioned within South Asia and in the broader Bay of Bengal region. It needs to play a more vibrant role in the region, and to do so, must engage more strongly with its East and Southeast Asian neighbours.
INTO INDIA was super pleased to see that Australia’s Minister for Foreign Affairs, Senator Penny Wong, has appointed Ms Swati Dave as the inaugural Chair of the Advisory Board to the Centre for Australia-India Relations (CAIR).
By all talks, the CAIR is going to be the new epicentre of Australia’s broad relationship with India.
It can take things to a new level. Much needed.
CAIR will open some time this year and will serve as a national platform to further strengthen our relationship with India.
Why is this such a strong appointment?
Ms Dave is currently Deputy Chair of the Asia Society Australia and as a member of the National Foundation for Australia-China Relations’ Advisory Board. She is also an Investment Committee member for QIC Global Infrastructure. Ms Dave has more than 30 years’ of experience in finance and banking across a range of sectors in both domestic and international markets.
She is the right person to guide the relationship to a higher level.
We need much more guidance on business relations, cross-cultural understanding and a broader cultural engagement with India. INTO INDIA has long called for more Australian investment in India -investment is a powerful basis for future trade.
CAIR will apparently work closely with the Australia India Council (AIC) and the Australia India Institute (AII).
Australia and India – stepping up with CAIR to a new, stronger relationship.
As this year comes to a close, INTO INDIA reflects on the game changer – the Economic Cooperation and Trade Agreement.
It surprised us all. Many did not expect it to be signed. Nobody expected it to be so vast in potential impact.
ECTA will save Australian exporters around $2 billion a year in tariffs, while consumers and business will save around $500 million in tariffs on imports of finished goods, and inputs to our manufacturing sector.
The tariff commitments provided by India in the agreement will open up access for Australia’s exporters of products including critical minerals, pharmaceuticals, cosmetics, lentils, seafood, sheepmeat, horticulture and wine.
Australian service suppliers will benefit from full or partial access across more than 85 Indian services sectors and subsectors. Australian suppliers across 31 sectors and subsectors will be guaranteed the highest standard of treatment that India grants to any future free trade agreement partner.
Australian services sectors to benefit include higher education and adult education, as well as business services such as tax, architecture and urban planning.
ECTA will support tourism and workforce needs in regional Australia by making 1000 Work and Holiday Program places available to young adventurous Indians. It maintains opportunities for Indian students graduating in Australia to undertake post-study work, with a bonus year of stay for high-performing STEM graduates.
India has always been skilled at dealing with both sides of diplomatic arguments – and it has an inclination towards “multilateral” and even “multi-bilateral” arrangements while western friends prefer “bilateral”.
So, it will be interesting to see what role Indian PM Modi will play at the 22nd leaders’ summit of the Shanghai Cooperation Organisation, to be held on 15–16 September – the first in-person gathering of the central Asian grouping since 2019.
While it might not make page one news, politicians and diplomats around the world will be closely watching this summit to be held in the ancient Uzbek Silk Road city Samarkand. Not only is it providing Xi Jinping and Vladimir Putin their first face-to-face meeting since the Russian invasion of Ukraine and declaration last year of a “forever partnership” – but it also comes after an interval where Indian PM Modi became closer and more impactful at the QUAD.
The members of SCO are China, India, Tajikistan, Russia, Kazakhstan, Kyrgyzstan, Pakistan, and Uzbekistan. Four Observer States were involved in granting full membership (Belarus, Iran, Afghanistan, and Mongolia) and six “Dialogue Partners” (Nepal, Armenia, Sri Lanka, Azerbaijan, Cambodia, and Turkey).
The QUAD nations are India, USA, Japan and Australia.
If he attends, Modi is expected to have meetings with Putin and Xi, giving a further glimpse as to how India is likely to map out its relationship with Eurasia’s great powers.
Modi has previously stood up to pressure from QUAD countries to condemn the Russian invasion of Ukraine, so as a leader he has a track record of combining non-confrontation with firm commitment to his own position.
The four leaders of the QUAD – a new closeness transforming this region
There’s a big change happening and it is spearheaded by the new dynamic of the Australia-India trade and security relationship – this is growing to provide a balance for Australia’s historic close alliance with the USA.
INTO INDIA has long felt that Australia has “looked north east” for too long and now is looking more “north west”.
For a while our diplomats and politicians talked about “the Indo-Pacific” as a way to introduce the change. But it is not a sustainable concept and there is no such region.
Australia has a Pacific Ocean strategy (USA) and is now building an Indian Ocean strategy (India). These relationship shifts affect our defence and security, as well as our trade and investment.
Matching that change, it is more than symbolic that an organisation such as the Australia India Chamber of Commerce is focussing on the key industry areas of greatest potential under the deal – and moving away from the old “federal” and state based approaches. Great! Under the old structures, outcomes were often lost in rivalries and politics.
The AICC model has one national organisation – supported by National Industry Groups. This frees up resources to make a difference.
So far the NIG’s include Education, Power and Renewables, Critical Minerals, Defence and Security, and Technology and Innovation. Small steps, but steps they are!
One step at a time, one change at a time, at so many levels, Australia is looking “north west” and taking a role in the Indian Ocean region by a close relationship with the new regional and global power, India.
The new strength of the QUAD (India, Japan, USA and Australia) is also part of the change and the new world of moving alliances.
If the move keeps going, Australia will have strength in two main regions and close relations with two major powers – India and the USA.