With the opening of the 4th Australian Consulate-General in Bengaluru in July 2023, the Australia-India relationship is moving into a new phase of diplomatic and economic understanding. Bringing a close tie between the two countries has unlocked several doors of business opportunities for the business communities of both countries. This development signals a significant hope for immense economic growth and prosperity in the Indo-Pacific.
Emerging as the fastest-growing economy in the world, India shines as the most attractive destination for business investment from companies across the globe. As key members of the G20 and Indo-Pacific partners, Canberra and New Delhi are moving towards a stronger business partnership. This new development in the Australia-India relationship will benefit the business communities of both countries.
A Brief Historical Development of the Australia-India Relationship
Canberra and New Delhi forged a new strategic relationship after establishing the Australia-India Council (AIC) in May 1992. The formation of AIC was recommended and approved by the Senate Committee on Foreign Affairs, Defence and Trade, which aimed at strengthening the Australia-India relationship in several strategic areas. Gradually, both countries developed a closer relationship and became significant international partners due to the regular two-way Prime Ministerial meetings and visits in 2014 and later in 2017.
Australia and India became strong strategic partners when both countries joined hands and entered into a Comprehensive Strategic Partnership (CSP) in June 2020. The partnership has brought a new era of mutual understanding, trust, and commitment between the two countries. Both countries agreed to work together in various fields, including trade and investment, science and technology, defense and maritime cooperation, tourism, education, and agriculture.
Since the relationship became stronger, Australian Prime Minister (PM) Anthony Albanese met his Indian counterpart, Narendra Modi, in Tokyo in May 2022 to push their bilateral relations further. The two leaders held regular meetings at international events, such as the G20, the Quad Leaders’ Summit, and the East Asia Summit.
Australia-India Bilateral Relations
As the Australia-India relationship progresses, Canberra has emerged as a close strategic partner for New Delhi. India holds annual leader-level summits with only three countries; Australia is one of them. Some of the major developments between the two countries can be seen in 2023.
The first India-Australia Annual Summit was held in New Delhi on March 10, 2023, between the two leaders, Albanese and Modi. Their engagements continued in Sydney from May 22-24, 2023, to extend their commitment to security and development activities. In November 2023, the second India-Australia Foreign and Defence Ministerial Dialogue took place among the high representatives of both countries.
By widening the scope of the CSP, both sides strengthened their commitments beyond security and defense. Both countries joined hands to deepen their cooperation across several areas, like trade and investment, research and education, renewable energy and climate change, water and agriculture, cyberspace, and mining & critical minerals. Most importantly, both countries had agreed to support the mobility of people and strengthen people-to-people connections between the two countries.
Bilateral Trade Between Australia and India
The trade relationship between India and Australia has grown rapidly over recent years. Both sides have taken several steps to enhance their strong economic ties and increase trade activities between them. In a recent development, the Australian Government mapped its pathway, “India Economic Strategy to 2035,” to bring closer economic relations with the latter country.
Through fostering the bilateral economic and trade relationship, Australia is looking to unlock the economic opportunities offered by Indian economic growth. Till 2023, India has become the sixth largest Australia’s trading partner. The Australia-India bilateral trade was worth USD 22.2 billion in 2021, which reached USD 31.4 billion in 2022, registering an annual growth of 41%.
Australia’s total exports to India shot up from USD 15.9 billion in 2021 to USD 22.5 billion in 2022. Similarly, India’s exports to Australia soared from USD 6.3 billion in 2021 to USD 8.7 billion in 2022. Major exports from Australia to India are coal briquettes (nearly 80% of the total exports in 2021), gold, copper ores and concentrates, ferrous and non-ferrous waste scrap, natural gas, and education-related services. India’s main products exported to Australia include medicaments, refined petroleum, textile articles, jewelry, and pearls & gems.
Australia-India Free Trade Agreement
The business relationship between New Delhi and Canberra reached a new height when both governments finally concluded a free trade agreement (FTA). In December 2022, both countries signed the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) to boost trade relationships. The agreement opened up new market opportunities and access for Australian businesses in the Indian market.
Senator Don Farrell, the Australian Minister for Trade and Tourism, said: “ECTA’s entry into force today opens up the world’s largest democracy, with nearly one and a half billion people, to Australian exporters – early entry into force sees Australian exporters receive a tariff cut today, followed by another on 1 January 2023.” He further stated, “Australia and India are natural trading partners – this agreement will unlock the enormous potential in our trading relationship.”
With effect from January 2023, the ECTA ruled that the tariffs on Australian exports to India have been slashed by 85% over a variety of products, including critical minerals, cosmetics, metallic ores, barley, oats, fresh rock lobsters, wool, lamb, non-ferrous metals, and titanium dioxide. Similarly, India’s exports to Australia are now almost tariff-free due to a 96% tariff reduction.
Business Opportunities for Australian Companies in India
Due to tariff reductions, several Australian companies can easily access the Indian market and take advantage of business opportunities offered by India. This can be a leap-forward moment, not only for manufacturing-based companies but also for Australian companies providing service support.
The trade agreement allows Australian service providers easy access to the Indian market across 85 sectors and sub-sectors, including financial, telecommunication, and distribution services. Moreover, Canberra is looking at New Delhi as a vital future trade partner and supplier for some key service sectors—construction and engineering services, business services, research and development (R&D), higher and adult education, travel, and tourism.
Over recent years, there’s been a rising demand for R&D services in India due to the rapid expansion of business activities across the healthcare, financial, and food & agribusiness sectors. Also, Australian companies have a strong presence in the infrastructure as well as mining and resources sectors.
In the services sector, India’s major exports to Australia are mostly associated with telecommunication, financial, travel, and professional services. At present, as many as 600 Australian companies are operating in India in various industries, such as financial, education, mining and resource, technology, healthcare, and consumer goods.
SMEC Holdings, BHP Group, Commonwealth Bank of Australia, Macquarie Group, FCM Travel Solutions, Telstra, Rio Tinto, Linfox Logistics India, Westpac Banking Corporation, Advanced Hair Studio, CIMIC Group, and QBE Insurance Group are some major Australian companies that have a market presence in India.
Availability of Skilled Resources for Australian Businesses in India
India remains the largest source of skilled professionals and talent for Australian businesses. Also, Indian students in Australia are the second-largest group of international students. Considering India’s rapid economic growth and abundance of highly skilled resources, New Delhi attracts business investments and ventures from different parts of the world. As a key international partner, New Delhi and Canberra agreed to work together to build broader people-to-people links and allow easy mobility of their people.
On May 24, 2023, Modi and Albanese signed the “Migration and Mobility Partnership Arrangement” to facilitate and promote two-way mobility between New Delhi and Canberra.
The main objective of the agreement was to enhance wider cooperation on migration, especially among students and business communities, for educational and business purposes. The arrangement laid out certain programs and support systems for greater business engagement and collaboration between the two countries. To strengthen the relationship between leaders and communities, both countries agreed to engage in several dialogues. For instance, commencing “Australia India Leadership Dialogue” and “Australia India Youth Dialogue” aimed at bringing business communities and youth leaders together. Also, organizations like the Indo-Australian Chamber of Commerce play a crucial role in elevating interactions among business communities by arranging regular meetings and events.
Conclusion
Australia and India share a common vision and understanding for economic prosperity and greater business engagement, not only for themselves but for the Indo-Pacific. With the rising business interactions between the two countries, New Delhi and Canberra open doors wide to promote regular business leaders’ meetings, student exchange programs, people mobility and migration, and business collaborations.
Looking at Indian growth potential in the coming decades, Canberra sees New Delhi as one of the most significant destinations for business investment and opportunities. With several positive developments in the Australia-India relationship, it’ll be relatively easy for Australian businesses to gain access to the Indian market.
The Australia-India relationship forges a new partnership of trust and mutual understanding to work together for greater interactions among the Australian-Indian diaspora, business communities, youths, and leaders of both countries. With the rising importance of the relationship between the two countries, New Delhi and Canberra are likely to talk about new trade policies and business initiatives after the Indian Lok Sabha election in 2024.
