Earlier this year, India overtook China to become the most populous country, according to the United Nations. With China’s population now falling, while India’s will grow for a few more decades, the gap between the two countries in population terms will widen over coming decades (Figure 1). Hence, it makes even more sense to explore opportunities for greater bilateral trade and investment flows between Australia and India. This is one of the objectives of the upcoming Horasis India Meeting in Adelaide over 26-27 November 2023. Adept Economics Director Gene Tunny is chairing a session at the meeting. As the Horasis organisation notes:
The meeting offers an ideal platform for senior business leaders from India, Australia and the world to explore and foster cooperation, impact investing, and sustainable growth…The 2023 Horasis India Meeting is co-hosted by the Government of South Australia and the Confederation of Indian Industry (CII) drawing together 300 of the most senior members of the Horasis Visions Community.
There is certainly potential to expand trade and investment flows between Australia and India. According to the India country brief of the Department of Foreign Affairs and Trade (DFAT):
In 2022, India was Australia’s sixth-largest two-way goods and services trading partner and fourth-largest goods and services export market. Two-way goods and services trade with India was $48.4 billion in 2022.
While it is expected that the Australia-India Economic Cooperation and Trade Agreement (ECTA) will boost bilateral trade and enhance cooperation in other economic areas, our current trade and investment flows with India are much lower than those with China. There is much room to grow them.
Two-way goods and services trade with China, our largest trading partner, was $267 billion in 2021-22, according to DFAT’s China country brief. Of course, China is the world’s predominant manufacturing country and is a big consumer of Australian commodities such as iron ore and coal. But with India overtaking China in population and now beating China in its rate of economic growth (Figure 2), a big question is whether India will eventually grow to become as economically important to Australia and the rest of the world as China is currently.
While India offers a lot of opportunities, it will still be some time before it overtakes China economically if it ever does. Currently, India’s GDP per capita and its GDP are much lower than China’s. In its World in 2050 report, PwC projected that, while India would become the world’s second largest economy by 2050, up from third place currently (in Purchasing Power Parity terms), it would still be nearly 25 percent smaller than China’s. Nonetheless, India’s relative economic importance in the world is ever increasing, and Australia is well-placed to benefit from this trend.
Published on 25 October 2023. This article was prepared by Adept Economics Director Gene Tunny with assistance from Research Economist Arturo Espinoza. For further information, please get in touch with us via firstname.lastname@example.org or by calling us on 1300 169 870.