Speaking at the 30th anniversary of CUTS International in Canberra yesterday, Peter Varghese, the secretary, Australia's Department of Foreign Affairs and Trade, said India was going through a significant period of change and its decisions on economic reform and financial opening were vital for trade and investment.
"Australia's ability to trade with and invest in India will inevitably be driven in part by decisions the Indian Government makes on economic reform and financial opening," said Varghese, the former high commissioner to India.
"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," he said.
He also lauded Finance Minister P Chidambaram and RBI Governor Raghuram Rajan for taking positive steps to address key concerns, including curbing the fiscal and current account deficits and shoring up capital flows.
He said even though the short term outlook may be below par, India's strong medium-term fundamentals were looking optimistic.
"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," he said.
"Reaching a high growth trajectory will depend on India getting its domestic policy settings right and investing in infrastructure, skills and institutions," he said.
Varghese said that 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."
There are 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, he said.
"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, he added.
Elaborating on Australia's economy, he said the country had comprehensive agreements with many nations and that talks were on with other economic partners including India.
"All of these efforts are aimed at positioning Australia at the leading edge of international economic reform," he said, adding Australia is already working on a Comprehensive Economic Cooperation Agreement with India.