Indo-Aus trade set to accelerate; but with riders

Even as India and Australia share the shores of the same ocean, both the countries have not seen much of trade ties, over the years. However, the situation might change soon, if both the countries work closely on economic diplomacy.

Last month, Australian federal government endorsed the India Economic Strategy (IES) - 2035, compiled by its former High Commissioner to India, Peter Varghese. As per the initial implementation of the IES 2035, four sectors -- education, agri-business, resources, and tourism -- where Australia has a comparative advantage, will get the prominence in the next 12 months.

India’s and Australia’s merchandise trade stood at A$ 20,856 million (almost Rs 1.08 lakh crore) for 2017, with Australia being the 9th principal import source for India. To put the things in perspective, the merchandise trade between India and Australia is mere 5% of the currency in circulation in India, which recently crossed the Rs 20 lakh crore mark.

The biggest component of merchandise trade during the year has been coal – worth A$ 9,181 million (almost Rs 47,500 crore). But with India emphasising more on the renewable and clean sources of energy this might hit a roadblock.

However, there is an alternative: Australian west coast is very rich in lithium ore – that is used as a renewable source of energy. Also, Australia has seen a lot of inflow of the Indian students over the past few years. In fact, education-related travel contributed A$ 3,431 million (Rs 17,500 crore) to Australian services exports in 2017, highest in the services category. Again, in its India strategy, Australia has stated, “Australian education services can help train the next generation of Indians”.

India’s and Australia’s merchandise trade stood at A$ 20,856 million (almost Rs 1.08 lakh crore) for 2017. DH Infographics: Gangadhar R

That doesn’t end here: Australia is looking at the influx of Indian students as a great diplomatic channel with India at a time when it is focusing on improving trade ties with India. More than 75,000 Indian students enrolled in Australian education institutions last semester alone and this has enormous potential for positive impact for the future.

“75,000 students in one semester: that’s a lot of friendships, a lot of contacts, a major brains trust and a cultural understanding that will transcend our business, commercial, cultural, governmental, diplomatic and security contacts and relations for years to come,” according to Simon Birmingham, Minister for Trade, Tourism and Investment, Government of Australia.

Australia’s commitment to the education relationship with India has been well-supported over the last decade through the Endeavour Scholarship Programme and the New Colombo Plan.

“We believe the education partnership is one that is best underpinned by two-way movement, by ensuring Australian students equally increase their understanding of and exposure to India. That is why with direct government financial assistance, we’ve supported more than 5,000 Australian students to study in India as well as providing targeted support for around 700 Indian students to study in Australia,” Birmingham added.

Even, as the Australian government is trying to make use of student influx as a source of diplomatic relations, the issues of racism persist – at least on a psychological level. Although the state police forces are doing their best to engage with foreign students, including Indian students, an Indian student from University of New South Wales (UNSW) told DH, “It is more of psychological thing here. I have seen racist comments being passed on my Indian identity twice in the past six months. But thanks to the policing here.”

Australia to attract more tourists

As part of its IES 2035 strategy, Australia is hoping to attract more and more tourists from India. As of 2017, travel only constituted A$523 million (almost Rs 2,700 crore) of Australian exports to India. But a reason behind that is lack of many direct flights between India and Australia. Currently, there are only seven direct flights between India and Australia, however, the Australian government is expecting to raise this number to 10 soon.

Despite this, Australia continues to see record spending and arrivals of people from India. “India’s contribution is predicted to be worth between A$1.9 billion and A$2.3 billion towards our tourism market by 2020”, Australian government officials said.

In fact, Australia is also partnering with a number of airports to sponsor the 2019 CAPA India Aviation Summit in Delhi, to push for more tourists from India.

However, that said, one of the major problems in Australia still remains as the lack of India’s understanding and Indian businesses, despite the fact that Australian Prime Minister Scott Morrison openly confessing that he loves to cook chicken curry for his family on every Saturday. But then, through influx of students and tourism, the Australian government is expecting a turn-around on this.

“India offers great opportunities for trade, and people in both countries have already understood the rich tourism offerings and education experiences in one another’s country. That’s why I want more Australians to better understand India, to update their perceptions of India and to imagine where Australia’s relations with India can take us,” Birmingham said.

Yet another problem that might cause hindrance in investment flow, between India and Australia is the bureaucratic red tape. Australia, in general, has eye for the detail and nuance in every investment they approve, which might hamper ease of doing business between two countries as it takes years for investments to take off. Currently, Indian investment in Australia is pegged at just A$ 15.5 billion, despite the country being home to over 5 lakh people of Indian origin.

Also a lack of free trade agreement might cause roadblock in terms of trade ties between two countries, but there is a hope in Australian government that Regional Comprehensive Economic Partnership (RCEP) -- proposed FTA between the 10-member states of the Association of Southeast Asian Nations (Asean) and the six Asia-Pacific states with which Asean has existing free trade agreements (Australia, China, India, Japan, South Korea, and New Zealand) -- will compensate for it.

“There is no reason why we can’t achieve a trade outcome of equal subsistence and meaning that a bilateral FTA would achieve through the regional process of RCEP,” Birmingham told a delegation of Indian journalists.

Australia might have seen a breakthrough moment by adopting IES 2035, but the fact remains that there is a very long road ahead for both the countries.

(This Correspondent was in Australia recently on an invitation from the Department of Foreign Affairs and Trade, Government of Australia)