A big deal: Australia-India trade set to turbo-charge the bilateral economic relationship
The signing of the historic Australia-India trade deal on 2 April, in a record time frame and of an unexpected magnitude, symbolises an unwavering commitment and deep mutual desire to turbo-charge the bilateral economic relationship.
For both sides the stakes and potential rewards are high. Australia is looking to India as a trusted and complementary trading partner amidst increasing geo-strategic/economic uncertainty. For India, this represents the first such trade deal with a developed nation in a decade.
Trade Minister Dan Tehan forecasts the trade deal – the Australia-India Economic Cooperation and Trade Agreement (AI ECTA) – will lead to a doubling of two-way trade (US$ 27.5 billion in 2021) over the next 5 years.
By significantly reducing or eliminating tariffs and opening up market access for goods, services, and intellectual exchange across sectors such as agribusiness, natural resources, pharmaceuticals, science, technology & engineering, business services and education, the AI ECTA heralds a new era of realising the enormous potential and paves the way for achieving a comprehensive economic cooperation agreement (CECA) with a potential global superpower. This would be the real goal.
The agreement last Saturday –- was not in isolation. It was the culmination of a fortnight’s hectic activity.
On 21 March Prime Ministers Morrison and Modi held their second virtual summit reinforcing their commitment to the India-Australia Comprehensive Strategic Partnership (CSP) and pledging further commitments towards deepening political, economic, security, cyber, technology and defence co-operation.
The next day, Mr Tehan launched two eagerly awaited Australian Government/Department of Foreign Affairs and Trade (DFAT) reports:
- Update to Australia’s India Economic Strategy to 2035 (IES); and 2. mapping of Australia’s Indian Diaspora: A National Asset.
The IES Update takes a 5 year view. It reinforces sectors representing traditional Australian expertise including in infrastructure and lays out the case for high-tech emerging sectors such as defence & space, signalling an aspiration to take the bilateral economic relationship to greater heights.
There is also an Australian investment package of over $280m towards strategic initiatives and sector-wise action plans for India, including a brand new $28.1m Centre for Australia-India Relations (CAIR) to support an expanding bilateral relationship.
Our two Governments have the benefit of a strong dosti or friendship and political momentum to strive to complete a CECA as planned by the end of 2022. Expeditious implementation of the action plans in the IES Update should promote targeted business activities, whilst further initiatives are developed to allow for even greater people movement between our countries and (sub) sector-wise collaboration to address key market opportunities.
The new Australia-India Critical Minerals Investment Partnership, to support prospective Indian investment in Australian critical minerals projects, is a brilliant example of what collaboration looks like and should provide a valuable mechanism for opening up alternative supply & value chains and IP creation in key areas of emerging technology and sustainability.
Businesses on both sides are urged to evolve their thinking and explore joint working models like these in each other’s countries, co-investing and committing longer term financial & human capital investment to achieve incremental outcomes including in areas of atmanirbhar or ‘self-reliance’.
Having mapped Australia’s 721,000+ strong Indian Diaspora, DFAT will have the benefit of the new CAIR infrastructure and should leverage global best practice, to design and implement effective engagement strategies and Indian literacy programs, covering business and culture, to help the Diaspora seriously lean into the relationship.
Our people-to-people linkages are critical for entrenching an investment-led mindset to the economic relationship for enduring mutual economic benefit, security, and prosperity of our two countries and the broader Indo Pacific region.
The Australian Government’s pro-active approach to driving the bilateral (economic) relationship forward, backed by enabling mechanisms and hard dollar investments is to be commended, but this begs a key question: Will Australian businesses match the ambition?
Of course, all problems have not been solved overnight. There are still some practical issues in doing business with India and it cannot be a panacea for tensions elsewhere. But Australian boards and business leaders should recognise that India provides them a potential growth and diversification strategy and so discuss with internal management and stakeholders:
- What is our current India strategy, and does it need to be refreshed, given the exciting developments across the CSP, IES Update and AI ECTA?
- Leveraging Government initiatives and the opening of the world’s second largest market by population (set to have 900 million internet users by 2025), what are the business models and opportunities that we can explore over the next 12-18 months?
- What is our present level of engagement with India? Why not start locally with your Indian counterparts across corporates, businesses, other networks and individuals within Australia’s rich Indian Diaspora?
Traditionally Australia corporates have put engaging with India in the ‘too hard’ basket. India’s GDP now means it is worth taking seriously as a significant economic partner. With help available at DFAT, Austrade and business chambers let us seize the new opportunities with New India.