The Commonwealth has emerged as a strong and sustainable grouping of nations possessing similar institutional foundations. Although a highly diversified group, consisting of large and small nations with advanced or developing economies, many of which landlocked or island groups, the Commonwealth has built long-term ties among its 53 members across Africa, Asia, America, Europe and the Pacific. India is the largest member nation in terms of population and third largest in terms of economy. This can play a significant role in fostering closer trade and investment links among the Commonwealth.
The Commonwealth countries have a combined population of 2.2 billion out of which more than half are citizens of India. It is notable that the demographic dividend favours the Commonwealth as 60 per cent of its population is below the age of 30. In terms of GDP, the total is expected to reach $14 trillion by 2020 and India’s share of this would be almost a quarter. India is also expected to be among the fastest growing members of the Commonwealth.
According to a research paper, trade flows among Commonwealth members, including exports of goods and services, aggregated about $ 3.4 trillion in 2013, constituting 15 per cent of the world’s total exports. Intra-Commonwealth trade is estimated at $687 billion at present. India’s total trade at $758 billion in 2014-2015 would be over 22 per cent of the aggregate.
The Indian economy offers substantial opportunities for both advanced and developing Commonwealth members due to several factors. One, Commonwealth nations would best be able to draw on shared language, systems and institutions to address India’s large and growing markets and strong developmental aspirations. In addition, India benefits from a large overseas diaspora settled across the Commonwealth, including in Africa, the Caribbean region, the UK, Canada and the Pacific. This cohort of overseas Indians imparts additional mutual understanding and interest to the overall economic relationship with India.
Two, the Indian economy is expected to continue growing at a time when growth in other economies, including emerging economies, remains fragile or in slowdown mode. The Indian GDP is projected to grow by 7.3 per cent in 2015 and 7.5 per cent in 2016, according to the IMF.
Three, the country would continue to offer huge markets due to its infrastructure, defense, and consumer sectors. India could become the world’s largest middle class consumer market with a total consumer spend of nearly $ 13 trillion by 2030, according to Deloitte. Railways, roads and highways, power, urban infrastructure, and so on offer big investment potential as the Government targets $1 trillion worth of investments between 2012 and 2017. These open up opportunities for machinery and equipment, core sector industries, consultancy and financial services and so on.
Four, the government has launched a new wave of economic reform policies to catalyse investments and propel growth. There is a strong emphasis on Ease of Doing Business where administrative procedures are being simplified, fast-tracked and placed online. On taxation, the government has taken a number of steps to evolve a simple, predictable and non-adversarial tax regime. At the same time, the Goods and Services Tax is expected to be introduced shortly, which would greatly free up internal markets.
Five, campaigns like Make in India, Digital India, Smart Cities, Clean India, Skill India and Startup India lay the foundation for the next wave of investment and growth. The government has outlined comprehensive and well-targeted policies for these areas, including for raising resources, public private partnership, and related sectors.
Make in India aims to transform India into a global manufacturing hub, leveraging India’s large and growing workforce and resource wealth. The Digital India programme targets both internet roll-out and hardware manufacturing as well as e-governance and digital literacy on a huge scale. The Smart City endeavor has identified 98 cities which would be taken up for modernisation and infrastructure construction, supplemented by other programmes for lower-tier cities. Skill India and Startup India are missions for capacity building and entrepreneurship development to provide income-generating opportunities to 10-12 million young people who are expected to enter the workforce each year for the next decade.
The Commonwealth is a very special forum for economic development and we must all walk together to make it a dynamic and vital platform for our future progress
FDI limits have been opened up across sectors to allow investors to set up bases in the country. Insurance, railway production and real estate are some of the areas which have been addressed. In the defense sector, India’s needs are large and it is attempting to create its own vibrant defense manufacturing sector as well as source equipment from overseas.
India has also entered into free trade agreements and comprehensive economic partnership agreements covering trade, services and investments with different countries which make it a viable hub for addressing markets from here. Two Commonwealth countries, Malaysia and Singapore, have signed economic cooperation agreements with India. South Africa is also a preferential trade partner, while FTA discussions are underway with Australia and New Zealand. Commonwealth businesses could look at investment and trade opportunities in the context of these agreements.
Regarding relations with emerging members of the Commonwealth, India has forged economic ties on the basis of trade, investments and developmental partnerships. Many Commonwealth nations belong to the category of Least Developed Nations, for which India has permitted duty-free access to its markets. India’s Developmental Partnership Assistance totals about $10 billion which goes towards building assets and infrastructure in emerging economies. Part of this is also available in Commonwealth countries. In addition, the EXIM Bank of India has extended lines of credit for project development in many countries including Commonwealth partners.
India has a special relationship with Africa, home of the largest number of Commonwealth members, and recently successfully hosted the Third India Africa Forum Summit which placed high importance on mutual economic relations. As per the agreement signed between the two sides in October, agriculture, energy, infrastructure, maritime economy, skill development, and cooperation and capacity building of small and medium enterprises are among the sectors identified for greater cooperation. Other areas of partnership include technology transfer, public private partnerships to encourage private sector participation, and strengthening of institutions.
Indian private investments in Africa have surged with ‘big ticket’ investments in the telecommunications, IT, energy, and automobiles sectors. Indian companies have become the largest source of FDI to Africa amongst developing countries. Capital investments from India to Africa have grown to $54.5 billion between 2003 and 2014 with 363 projects.
Businesses from India and other Commonwealth nations can draw heart from the fact that, according to econometric analysis, Commonwealth members are already trading more between them to the extent of 25 per cent for goods and services, and also that trade costs come in at 19 per cent lower for trade between Commonwealth members. In addition, these countries generate more FDI flows. Hence, it makes sense for businesses to develop strategic plans for elevating their participation in each other’s economies. The Commonwealth Enterprise and Investment Council (CWEIC) has been set up recently to accelerate such ties.
In addition, the Commonwealth should fast-track efforts to alleviate barriers to trade, promote technology partnerships, and improve private sector participation for trade and investment. The engagement of small and medium enterprises in the overall economic engagement among Commonwealth members is a central task. Capacity building for both workers as well as entrepreneurs needs to receive high attention so that Commonwealth citizens are better able to contribute to developmental efforts. The soft infrastructure of education, technology training, healthcare and IT adoption should be taken up strongly as well.
The Confederation of Indian Industry (CII) has had a long engagement with the Commonwealth and partners with the Commonwealth Business Forum on a sustained basis to further promote business-to-business ties among Indian industry and Commonwealth industry. Our office in London spearheads cooperation with the Commonwealth Secretariat and we work closely on economic initiatives.
CII serves as a unique contact point and facilitator for overseas business and we are keen to assist Commonwealth businesses in building their engagement with India. To further intensify this engagement, CII and CWEIC signed an agreement in July 2015 which would build initiatives on skill development, sustainability and SME partnerships. It would explore business opportunities and enhance Indian industry’s initiatives in Commonwealth nations.
The Commonwealth is a very special forum for economic development and we must all walk together to make it a dynamic and vital platform for our future progress.
Chandrajit Banerjee is the director general of the Confederation of Indian Industry.