The International Monetary Fund says India will overtake China as the world's fastest growing major economy this year. As India's rate of expansion accelerates towards 8 per cent, China's is easing  below 7 per cent.

It's not the first time in the modern era that the elephant has outpaced the dragon – India's growth pipped China's briefly in the late 1990s. But this time the forecasts suggest India's lead will last for some time.

This change at the top of the growth leader board raises an awkward question for Australia: why have our businesses made such slow progress in the world's fastest growing economy?

When I arrived in Delhi in 2007 to take up the job as Fairfax's correspondent on the subcontinent, hopes for the India-Australia economic relationship were sky high. India's growth rate was around 9 per cent that year and authorities in Delhi were courted by political and business leaders from across the globe.

I've watched political and strategic ties between Australia and India go from strength to strength in that time.

But the economic relationship has been more erratic. Things were looking very promising for much of last decade. Between 2004 and 2010 India vaulted from being Australia's 12th-biggest export market to vie with South Korea for third-biggest. During the three years I lived in Delhi, Australia's exports to India grew even more quickly than exports to China.

But Australian exports to India peaked around 2010 and have been in decline since.

This has exposed some major shortcomings in the economic relationship, particularly the narrow range of goods and services Australia sells to India. Just two items – coal and education – accounted for 57 per cent of the value of all Australian exports to India last financial year.

Looking back, the heady surge in export growth earlier this century failed to broaden and deepen economic ties between Australia and India. During a visit to India this week, Foreign Minister Julie Bishop said India was now Australia's seventh-largest export market. The contrast with China is striking – two-way trade between Australia and India was worth just 7 per cent of total trade between Australia and China in 2013-14.

The recent slump in iron ore prices and its effect on the federal budget and the economy has underscored the danger of Australia's dependence on trade with China. Our economy would be in a stronger position if businesses had paid more attention to building a presence in the Indian market.

"From a geopolitical point of view it makes huge sense to diversify our trade relationships so it's not all about China," says Professor Rory Medcalf from the Australian National University's National Security College. "India has significant potential as a kind of insurance policy against the China story going bad."

In a global economy marked by what the IMF calls "uneven growth", India stands out.

The World Bank joined the IMF in talking up India's economic prospects this week.

"Recent economic activity has been on an upturn," the bank's latest assessment of India said.

"Growth has accelerated, inflation has declined, current account deficit has narrowed, and external buffers have been replenished."

The election of a new government last year, led by Prime Minister Narendra Modi, has raised hopes for a stronger economic performance after a marked growth slowdown between 2011 and 2013.

The World Bank says the Indian economy "is poised to accelerate on the back of an ambitious reform agenda, and faster growth is expected to further drive down poverty". India, which is highly dependent on imported fuel, will also benefit from lower oil prices.

But Australian firms have found India tough. Some of our biggest companies, including ANZ, Telstra and Woolworths, have made promising investments in India only to retreat.

The withdrawal of these well-known firms did some damage to Australia's reputation. It left many in India with the impression our companies were only in it for easy profits. A recent survey by the Australian Trade Commission revealed that Australian exporters rate India a harder place to do business than in six other major export markets including China, Indonesia and Japan.

A lack of understanding about local cultural and business practices was ranked the biggest barrier to doing business in India. The perception that India was a difficult place to do business was found across all industry sectors.

In a speech in Delhi this week, Julie Bishop candidly acknowledged that some Australian firms had given up on India.

"Australian investors have seen some difficult challenges, and it's a fact that some investors left the Indian market," she said.

Australian investment in India, which totalled $6.5 billion last financial year, is also lagging. Australian investments in the island nation of Singapore were more than five times that amount. "The relationship between Australia and India has arrived politically but economically a lot of the hard work lies ahead," says Medcalf, who has previously worked as an Australian diplomat in India.

The Abbott government is trying hard to boost economic ties. It is pushing for a quick conclusion of a trade deal with India dubbed the Comprehensive Economic Co-operation Agreement. Trade Minister Andrew Robb will hold talks in India next week in a bid to advance negotiations.

Australia's Senior Trade Commissioner in India, Nicola Watkinson, says the reform agenda of the Modi government meant some Australian firms were taking a "fresh look" at India.

"In the past six months we have been busier than we've ever been," she said. "That's not just at the political level but because of the large number of senior business people from Australia that are coming back to India to have another look."

Australia needs to build deeper economic ties with India. But to succeed, businesses will have to look beyond short-term profits and make a long-term strategic investment in India.

"They'll have to be willing to do it tough for a few years," Medcalf says.

So far, that's something many Australian corporates have not been prepared to put up with.

Ross Gittins is on leave.