For over 20 years, the trade and investment relationships between the two countries just cruised along, without urgency or intent. The India-Australia Economic Cooperation and Trade Agreement, signed on April 2, suddenly changed that.
“On the basis of this agreement, together, we will be able to increase the resilience of supply chains, and also contribute to the stability of the Indo-Pacific region,” Prime Minister Narendra Modi said.
Echoing his sentiment, Union Commerce Minister Piyush Goel described it as a watershed moment, “It is a prelude to the exponential growth prospects of our trade and investments in the years to come.”
The ECTA was signed by Goyal and his counterpart Australian trade, Tourism and Investment Minister Dan Tehan in a virtual ceremony attended by PM Narendra Modi and his Australian counterpart Scott Morrison.
The scale of the new deal has opened doors like never before. All of a sudden, it would turbo-charge trade between the two countries and could see India-Australia trade nearly $45- 50 billion within five years.
It comes on top of India and Australia really getting to know and understand each other as they participated in the invigorated Quad group with Japan and USA.
Yet, few expected the scale of this deal – tariffs will be eliminated on more than 85% of Australian goods exported to India, which will rise to about 91% over 10 years. A whopping 96 percent of Indian goods imports will now enter Australia duty-free.
This will provide a welcome boost for labor-intensive sectors in India and generate over a million jobs. Among the surprises is the deal to liberalize visa norms for students and professionals, including a quota for Indian chefs and yoga teachers.
The two countries want a doubling of trade in five years. Experts believe this is a conservative estimate which does not take into full account the new appetite for business and education connections.
After the Australian FTA with China, few predicted the massive growth to $235 billion, leapfrogging China into a clear leader among Australia’s trading partners. The same rate of growth could happen to India if businesses and government grasp the opportunities of this new deal.
Of course, somewhere in the background of this new closer relationship of Australia and India is China, but it also reflects a changing view of India from “down under” in Australia. The message is getting through that modern India is now an economic power, and fast becoming a regional security power.
The economic case is clear – India is by far the fastest-growing major economy in the world – with GDP projected to grow at 9% in 2021-22 and 2022-23 and 7.1% in 2023-24.
Business and political leaders have realized that two-way trade of $24 billion and goods and services at $17 billion is just not good enough. The Australian Government previously set a goal to lift India into our top three export markets by 2035 – this should urgently be revised and brought forward to 2030 or even earlier.
“I am also keen to see investment between the two countries becoming a bigger priority – investment is a part of the trade story and India could become the third-largest destination in Asia for outward Australian investment,” says Stephen Manallack, Director of EastWest Advisors and former President of Australia India Business Council.
There is a 700,000 strong Indian diaspora in Australia and Indians are expected to outnumber Chinese-born Australians over the next decade. It is also the second-highest taxpaying diaspora after the British.
“Clearly it is a group making significant contributions to Australia’s economy. It can contribute more to building the cross-border relationships we need,” says. Manallack.
