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opinion

The financial crisis and worldwide recession will have lasting implications for the international economy, interacting with global structural shifts already under way. As the world's economic centre of gravity shifts away from the U.S. and Europe, it is estimated that by the end of this decade half of all global goods and services could be produced in the India-Japan-China economic triangle.

For Canada, the "advantage of proximity" to the U.S. marketplace will be increasingly counterbalanced by the "tyranny of distance" as we decide how best to connect to these emerging powerhouses, and them to us.

In this changing dynamic, Canada's national interests call for a stronger focus on India.

Canadian and Indian shared experiences run deep, rooted in our parliamentary democracies, federal systems of government, common legal codes, Commonwealth heritage, English as a national language, and pluralistic societies. (More than one million Canadians are of Indian descent.)

India is emerging as an economic powerhouse, achieving average real annual growth of 8.75 per cent over the 2003-to-2007 period, and combined this strong growth with poverty reduction. The main driver of India's growth has been domestic demand, particularly investment (not exports, as in China).

India's financial system also avoided the worst of the banking woes experienced by U.S. and European financial institutions. Like China, India avoided recession in the global downturn - healthy growth of 6.5 per cent is expected this year, and stronger thereafter.

Yet the trade and investment links between India and Canada are surprisingly small for two $1.5-trillion economies. Annual trade in each direction is just over $2-billion; investment flows have been modest until recently; and science and technology links are only beginning to grow since the signing of an agreement in 2005.

Equally striking is the absence of a "Canada brand" in India and the lack of knowledge about our country. Whatever the reasons, surely the extent of our commonality demands a stronger relationship in the national interests of both countries.

India is a country with amazing physical, social and economic diversity. It is a developing country with world-class high-tech industries, where globally successful entrepreneurs coexist with advocates of statist policies and protectionism.

It is the world's most populist democracy, but the bane of India's political process is fragmented coalitions. The infrastructure is problematic, but the ability of Indians to work around it is astounding. The seeming chaos of overcrowded Indian cities reflects an extraordinary energy and dynamism. Despite its many challenges, India has an enormous potential to unleash.

The growing middle class, concentrated in those burgeoning urban centres, is demanding better infrastructure, more transparent local administration, and more efficient rule of law.

India offers much potential for Canadian business. But the Indian infrastructure deficit is an increasing choke point on growth; the country must invest massively in its public and private infrastructure.

The growing middle class wants modern shopping facilities, better housing, communications and financial services. Businesses need modern commercial buildings and sophisticated capital markets. Energy production and transmission are inefficient and expensive, and natural resource facilities are outdated.

What might the architecture of a new Canada-India partnership look like? It would begin, as both governments have done recently, by removing historical impediments, such as tensions over nuclear safeguards.

But lasting partnerships start with relationships. Stronger networks are needed between India and Canada, anchored by political leaders, business CEOs, public servants, and university heads. An "eminent persons" advisory group could assist in transforming the relationship.

An innovative Canada-India economic partnership agreement should be considered. It could leave trade in goods, particularly agriculture, to multilateral efforts and focus on services, investment protection, intellectual property rights, and a deeper science and technology agreement, as well as dispute resolution mechanisms and worker mobility provisions.

We need to build a "Canada brand" in India, whose potential payoffs are evident from successful Australian efforts throughout Asia. Canada has much to work with: strong cultural links, including Bollywood; high-tech companies; a strong university research system; natural resource strengths; and a multicultural society and work force.

Canada's economy can benefit enormously from a deeper relationship, and so, too, can the Indian economy. Prime Minister Stephen Harper's visit to India last December was an important first step. Now is the time for Canadian companies to strengthen ties with India.

Kevin Lynch is vice-chair of the Bank of Montreal

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