A Perfect Match

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Australian SMEs strength in innovation and India’s huge market could result in increased GDPs for both nations

By Rohini Kappadath

A recent feasibility study towards implementing a Free Trade Agreement between India and Australia, which engaged stakeholders across the nation revealed broad support for the FTA with India. Independent modelling conducted in 2008 which took into consideration implications for economic growth, trade in goods and services, and investment, as well as for other commercial linkages indicates that an Australia-India FTA could result in a net increase in Australia’s GDP by up to US$32 billion (A$45.5 billion) and India’s GDP by up to US$34 billion (A$48.3 billion) over a period of 20 years.

As the Indian economy accelerates to 10 per cent rate of growth per year, Australia is presented with a significant opportunity to take advantage of the structural complementarities between the two economies leading to considerable scope for enhanced investment links.

The big opportunity for Australian SMEs is to leverage the entrepreneurial ability and strong management talent of Indian SMEs.   By identifying and establishing links with the rising stars of the Indian SME landscape, Australian SMEs, who have invested in innovation and technology can extract the value in their companies by gaining access to a much larger market for their products and services. In collaboration with the right Indian SME partner, these businesses can execute global strategies and build global brands.

For Australian business interested in India, the growing states are among the most attractive destinations for exports and investment. Their incomes are higher, they are growing more rapidly than other states, and their governments are more proactive in supporting business. Furthermore, some of the best prospects for Australian exporters lie not only in agricultural and resource commodities, which currently dominate Australian exports to India but increasingly in meeting growing ‘new economy’ demands for imported goods and services. IT, telecommunications, finance, insurance, health education, environmental services, media, entertainment and biotechnology are all sectors showing increasing promise.  Exporters and investors are also developing opportunities in processed food and fresh fruit, high technology manufacturing, mining, gas and ports. Many Australian firms such as Cookieman, Unibic, Cartrdige World, Heat & Control, Attra Infotech, Surpac Industries are already accessing these opportunities.

While Indo-Australian trade has reached a critical mass and is steadily deepening and broadening across several sectors, a qualitative change to the economic relationship can be further achieved through long term investments and technology share.  A shift in the lending practices of our banks and a move towards developing a true understanding of the potential of cross-border enterprise could result in more successful commercial linkages between Indian and Australian SMEs.

A major reason cited by small business for not entering export markets is the lack of skilled staff with overseas sales experience. Australian companies can add further texture and depth to their Indo-Australian ties by building on the strategic relationship with India and focus on building people-to-people contact to complement their trade links.   A move towards internationalisation by Australian SMEs also forges stronger links with other nations right across the Australian community.

The big opportunity for Indian SMEs is gaining access to the innovation and technology clusters that lie hidden within the huge landscape of Australian SMEs.  Australia has a vibrant SME culture with over 1.3 million small businesses, many of whom are managed by young, internet savvy  entrepreneurs who have built IP rich businesses.

Australian SMEs strength in innovation and India’s huge market could indeed be a perfect match.

The writer is Head of Cross-Border Business at business and advisory firm Pitcher Partners

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