The Australia-India Economic Cooperation and Trade Agreement, signed on 2 April, will turbo charge trade between the two countries and could see India become our third largest trading partner at over A$75 billion within five years.
Our message to Australian business and education leaders is get on the plane as soon as you can.
Everyone in the Australia-India economic relationship is surprised by the magnitude of this deal, which covers almost every sector – they were expecting a small range of “early harvest” deals. The size of the deal is literally a shock, and this will become an urgent action point for board rooms around Australia.
Sheep meat, resources, wool, horticulture, wine, professional services, education, tourism, pharmaceutical products and medical devices all benefit. Australian services suppliers in 31 sectors and sub-sectors will be guaranteed to receive the best treatment accorded by India to any future free trade agreement partner, including in: higher education and adult education; business services; medical and dental; architectural and urban planning; research and development; communication; construction and engineering; insurance and banking; hospital; audio-visual; and tourism and travel.
We see Australia and India rediscovering that we are “natural partners” – we are democracies, we share borders onto the Indian Ocean, we have the rule of law, love of cricket, commitment to educating the young and are both vibrant “multi-cultural” communities.
Both Governments set targets of doubling trade in 5 years to A$50 billion, a conservative estimate which does not take into full account the new appetite for business and education connections.
This new focus on India is partly due to China, but also reflects a changing view of India.
India is by far the fastest growing major economy in the world – with GDP projected to grow at nine per cent in 2021-22 and 2022-23 and 7.1 per cent in 2023-24.
After the FTA with China, few predicted the massive growth to $235 billion, leapfrogging China into clear leader among our trading partners. The same rate of growth could happen to India if business and government grasp the opportunities of this new deal.
We see the current two way trade of $24 billion and the goods and services at $17 billion as representing the “sleepy” era where neither country worked too hard at building closer connections.
Now both countries have woken up to the vast potential of our relationship – which should trigger our business and education leaders to a more urgent approach to India.
Our education section now needs to reimagine the India relationship, make it more collaborative and make Australia the number one choice for Indian students. Extensions of work visas to two and four years for Indian students will lead to a sharp increase in demand – perhaps more than our educators anticipate.
Business is ready to be more active and government can play a role by reinvigorating trade missions which focus on specific opportunities.
The deal includes the stunning result of tariffs to be eliminated on more than 85 per cent of Australian goods exports to India (valued at more than $12.6 billion a year), rising to almost 91 per cent (valued at $13.4 billion) over 10 years.
Australian households and businesses will also benefit, with 96 per cent of Indian goods imports entering Australia duty-free on entry into force.
Our Government’s goal is to lift India into our top three export markets by 2035 – this should be revised and brought forward to 2030 or even earlier.
Investment is a part of the trade story and India could become the third largest destination in Asia for outward Australian investment. Here again Government can take the lead, encouraging our funds managers and superannuation funds to fully investigate investment opportunities in India. Macquarie Bank has already shown the way and others need to follow.
Illustrating just how comprehensive this deal is, Australian Prime Minister, Scott Morrison, said: “This is great news for lobster fishers in Tasmania, wine producers in South Australia, macadamia farmers in Queensland, critical minerals miners in Western Australia, lamb farmers from New South Wales, wool producers from Victoria and metallic ore producers from the Northern Territory.”
Prime Minister Morrison has worked hard on the relationship with Indian Prime Minister, Narendra Modi, through the Quad plus a $280 million investment program, and other regional and personal meetings.
Trade Minister, Daniel Tehan, has a close working relationship with Indian Commerce Minister, Piyush Goyal, who is a regular and popular visitor to Australia. Reflecting the urgency of this deal, the Australia India Chamber of Commerce will host Ministers Goyal and Tehan at a private business lunch in Melbourne this week – a signal that making this deal work is a top priority of both.
Australia’s Indian diaspora numbers approximately 700,000, and Indians are expected to outnumber Chinese-born Australians over the next decade. Significantly, it is the second-highest taxpaying diaspora after the British, making it clear that it is a group making significant contributions to Australia’s economy. It can contribute more to building the cross-border relationships we need.
Both governments have demonstrated that trade all comes down to people-to-people relationships. It is now up to our business and education leaders to do the same, lifting the Australia-India relationship to where it belongs.
Harish Rao is Executive Director, Australia India Chamber of Commerce. The views expressed are his own
The Australia-India Economic Cooperation & Trade Agreement, signed on 2 April, will turbo charge trade between the two countries & could see India become our third largest trading partner at over A$75 billion within 5 years. 🇦🇺🇮🇳 #TheIndianSunhttps://t.co/eJugXut7xn
— The Indian Sun (@The_Indian_Sun) April 4, 2022