India – Productivity drive places focus on trade and investment

Economic reforms to boost manufacturing and foreign investment could provide opportunities for Australian investors and exporters. 

The recently re-elected government is instituting a wide-ranging set of economic reforms to boost growth and combat slowing world trade. The government has lifted foreign investment restrictions in coal mining and contract manufacturing, easing foreign restrictions for digital media, and eased rules on single-brand retail.

While the growth rate fell to 5% in the April-June quarter of 2019, India remains one of the fastest growing large economies in the world.

The economic reforms are aimed at increasing manufacturing and exports, helping boost growth in the short run. They come on top of demographic factors that make longer term growth prospects very positive. The population of more than 1.3 billion contains a relatively small but rapidly expanding middle class that is driving consumption and imports.    

India is Australia’s sixth-largest trading partner, with two-way goods and services trade valued at more than $30 billion in 2018. However, India was only the eighteenth largest destination for Australia foreign direct investment (FDI) ($15.6 billion in 2018). Both trade and investment have increased at an average annual rate of over 15% over the past five years. Further reforms would present Australia with significant opportunities to expand and diversify its trade and investment.