AUSTRALIA and India, the Indian Prime Minister, Manmohan Singh, once remarked with acute insight, are two countries with a great deal in common but which have very little to do with each other.

Prime Minister John Howard will try to remedy that tomorrow night when he arrives in Delhi for a three-day visit to India which will also take in Mumbai, the commercial and entertainment capital, and Chennai (formerly Madras), the heart of Tamil civilisation.

Howard's visit is deadly serious. It is a recognition of the unique intersection of geo-strategic, economic, cultural and diplomatic importance which is accumulating around New Delhi in a process of great historic importance.

On every front that counts, in every policy question that defines our age, India is a central part of the equation. Australia must do much better with India than it has in the past.

The Australian bureaucracy has had three impediments to understanding and acting on the real importance of India. These are: an obsession with the Nuclear Non-Proliferation Treaty, an obsession with China and a tendency to group all things Indian with Pakistan.

All of these destructive bureaucratic habits of mind need to be broken if Australia is to reach anything like its potential with India.

Howard's visit follows hot on the heels of George W. Bush, who in turn barely missed France's Jacques Chirac, who in turn was in New Delhi only shortly after Britain's Tony Blair. All of these leaders recognise the centrality of India to the new global equations. Howard will be accompanied by a big business delegation and this is as it should be. The potential economic relationship between Australia and India is vast. Already India is our sixth largest export market, ahead of Britain, with total two-way trade of $10 billion, with the balance substantially in our favour.

India's budget, brought down this week, indicates growth of more than 8 per cent in the Indian economy this year, a similar figure to that achieved in the past few years. This puts India just behind China in growth rate for a substantial economy.

India stands in direct line to Japan and China as likely to produce the same economic opportunities for Australia that those other two Asian giants did. The energy demands alone of India's rapid development will be huge. It will need other bulk commodities in enormous quantities. But more than that, the potential in service industries is almost limitless as India's middle class is growing exponentially.

You can get all kinds of startling statistics out of the Indian economy. About a third of all computer engineers in the US's Silicon Valley are Indians, but there are now more Indian computer engineers in Bangalore, India's high-tech capital, than in Silicon Valley.

India, like China, is still a difficult market and Australian companies can often do with the help of government agencies such as Austrade. But there are already 25,000 Indian students studying in Australia. India has been the fourth highest source of migrants to Australia in the Howard decade. Given the irreducible connections of cricket and the English language, this is a relationship waiting to boom, apparently designed in heaven and awaiting only the merest human agency to take off spectacularly.

But in some ways the economic stuff is the easy bit. There will be no opposition to this from anyone and it's just a matter of Australian energy, infrastructure and effort.

But other parts of the relationship are more complex and demand a more significant input from the political level of leadership, from Howard himself and from cabinet.

In 1998 India tested a nuclear weapon. This was a shocking moment for the world as it breached the Nuclear Non-Proliferation Treaty, although India had never signed the NPT. At first the policy impulse of the US and Australia was to try to reverse India's decision, an utterly futile and pointless position.

Australia over-reacted to the Indian test and in fact the US accommodated India before Australia did, leaving Canberra in the bizarre, though not totally novel, position of defending territory that the US had abandoned. It is not only futile to expect India ever to give up its nuclear weapons, it can damage good policy. The priority now must be to assist India in making sure it has good command and control procedures to keep its nuclear arsenal safe, and helping it develop a peaceful nuclear energy industry so that it will need to chew up fewer fossil fuels in its burgeoning development.

Moreover, there is a central strategic dimension to all of this, which is India considered vis-a-vis China. India and China, though they have a history of conflict, now have quite good bilateral relations. However, China has opposed India getting a permanent seat on the UN Security Council and has opposed a regularised relationship for India with the Nuclear Suppliers Group.

No one can play the India card against China. India is far too powerful and independent for that. Nor, indeed, would anyone want to. It's in everyone's interests for India and China to have a stable, peaceful and economically enriching relationship.

However, India undoubtedly does provide a balance to China at several levels. First, at the strategic level. India is an important military power with a continental-size landmass, formidable armed forces and a developing blue-water navy.

Just by being there, being itself and being successful, India vastly complicates any potential Chinese leadership's move towards an aggressive posture, should any Chinese leadership be so tempted in the future.

As former US ambassador to India Robert Blackwill has argued, it is overwhelmingly in the US's interests (and in Australia's interests, too) for there to be a broad strategic parity between India and China. It would be against Western interests for India to be permanently consigned to an inferior status militarily to China.

In the nuclear realm, India has a perfect record of never having proliferated nuclear weapons material or technology to any other nation. China on the other hand has an appalling record, not recently but in the past, of giving nuclear technology to Pakistan and North Korea. If Islamist terrorists ever do get their hands on nuclear materials the ultimate design is likely to have come, albeit unwittingly, from China.

Therefore it would be insane for the US and its allies to freeze India out of this technology while China enjoys unfettered nuclear co-operation. Bush and Prime Minister Singh are trying hard to work out a nuclear deal in which India separates its military and civilian nuclear programs and then the US engages in full nuclear co-operation with India.

When the outlines of this deal were first announced Howard was broadly supportive of it. In time this could have significant implications for Australia as an exporter of uranium. Certainly if Australia is to export uranium to China it is difficult to see an argument against exporting it to India.

The Australian bureaucracy needs a dose of new thinking on these issues, and this can only come from Howard and Foreign Minister, Alexander Downer.

Similarly, as well as supporting India for a seat on the UN Security Council, Australia should announce unilateral support for Indian membership of APEC and should invite India to attend next year's APEC summit in Sydney.

India also plays a central role in the war on terror. With 130 million Muslims, India has the most Muslims of any nation apart from Indonesia.

Yet not a single Indian has joined al-Qa'ida. No Indian was discovered in Afghanistan. None is held in Guantanamo Bay. This is a great tribute to India's secular democracy. This democracy is another way in which India balances China - and that is ideologically. It is impossible to argue that democracy is not practical for poor, big countries, or that it is a Western construct, with India in the room.

Increasingly India plays a pivotal role in Asian organisations. It is part of the East Asia Summit. It was part of the core group, with the US, Japan and Australia, in responding to the Asian tsunami of Boxing Day 2004. And it is part of the partnership for clean development with the US, Australia, Japan, China and South Korea.

The Australia-India partnership is pregnant with possibility. Can Howard be the midwife of history this week?